Draconian copper tariffs are coming. Will they hit KGHM?

• On July 9, Donald Trump announced 50 percent tariffs on European copper. The levy is set to take effect on August 1.
• The announcement of draconian tariffs and the investigation into the matter by the US Department of Commerce, commissioned back in February, have prompted US importers to prepare for the worst and stockpile the raw material for months. They've bought as much copper this year as they did all of last year.
• However, the US is dependent on imports. It won't achieve self-sufficiency in production of this raw material for another decade or two.
• And how will the tariffs affect copper giant KGHM? We have a statement from the company on the matter.

Starting August 1, copper imported from Europe to the United States will be subject to a 50 percent tariff . Donald Trump announced this decision on July 9 , but no official document has yet been issued.

Americans are stockpiling raw materials. Some ships will be returned to Europe.

Nevertheless, markets are already preparing for such a scenario. Analysts across the Atlantic believe that upcoming tariffs on copper imports will disrupt trade flows and increase the use of materials accumulated in US warehouses during the first half of this year.

Florian Grünberger, senior macroeconomic analyst at Kpler, a business intelligence agency, believes that, given the margins on the New York Comex precious metals exchange, the market estimates that the final copper tariff rate could fall by half compared to the announced rate, i.e. to 25% .

However, according to Grünberger, Trump's announcement will result in a short-term increase in seaborne imports to the US from Peru and Chile , because ships from these countries still have time to unload in the US before the tariffs come into force.

“However, ships currently queuing to load copper from more distant destinations, such as South Africa or Australia, will be redirected from the US to Europe and China, where inventory levels in warehouses have fallen significantly since the beginning of March,” the analyst said in his report.

Grünberger adds that after the Commerce Department's investigation into the national security implications of tariffs was announced in February this year, American importers quickly increased their copper imports to the US to replenish their stocks before the tariffs were raised.

Kpler data shows that the United States has already imported 568,000 tons of copper this year, which is as much as in all of 2024 (598,000 tons).

Prices will drop when tariffs come in, a big stock clearance will begin

This surge in copper prices on the US Comex, which has far outpaced prices on the London Metal Exchange (LME), is expected to end after the tariffs are implemented, when US buyers "will likely start selling off their stocks ."

“There is now more copper in Comex warehouses than in the warehouses of the LME and Shanghai Futures Exchange combined,” wrote Warren Patterson and Ewa Manthey, commodities analysts at ING.

According to Kpler, existing copper reserves overseas could be sufficient to meet most of the US domestic demand by the end of the year . However, US smelter capacity is currently insufficient to compensate for copper imports , and building a greenfield smelter "takes at least five years," the intelligence agency notes in its report.

At the same time, Kpler analysts forecast that demand for copper will grow significantly over the next decade, driven by the development of electrification and data centers.

“The United States will likely need additional copper mines and smelters to become self-sufficient,” Grünberger’s report states, adding that such self-sufficiency, however, will not be achieved until the next decade.

Meanwhile, the impact of Trump's earlier tariffs on other metals, such as steel and aluminum, is already spreading.

The British-Australian giant Rio Tinto, which also operates in Canada , announced on July 16 that it has already incurred costs of around $300 million as a result of the introduction of US tariffs on aluminum imports from Canada.

Meanwhile, the European market was literally "flooded with steel that the United States can no longer absorb."

- The situation is worsened by overcapacity in the global steel market, mainly due to depressed export prices from China, says the European Steel Association.

KGHM is addressing U.S. tariffs. The company operates two copper mines in the U.S.

And how will our copper giant cope with the prospect of 50 percent tariffs on copper?

According to the statement sent to us by KGHM, "for KGHM, the American market does not have a significant share in the geographical structure of sales of products manufactured by KGHM outside the USA, which means that the direct impact of any potential tariffs will be very limited ."

It's worth noting that KGHM operates two mines in the United States : Robinson in Nevada and Carlota in Arizona. The Robinson mine extracts copper, gold, and molybdenum, while the Carlota mine focuses primarily on copper. Copper mined in the US is not subject to trade sanctions.

The company points out that the introduction of tariffs on copper has been announced for several months, so it is not a surprise to the market .

On the other hand, there are no official White House documents on the tariffs yet, so it is difficult for them to comment on the reports from July 9.

"Any reactions from U.S. trading partners, especially the potential escalation of trade barriers in various regions of the world, could negatively impact the dynamics of global economic growth and, consequently, demand for raw materials. Therefore, the company continuously monitors and analyzes elements affecting international trade," the KGHM press office wrote in response to a question from WNP.