Investing.com - The price of copper has been on a rise for much of this year, helped by expectations of potential U.S. tariffs, and Morgan Stanley sees room for the metal to keep on rising.
By 09:50 ET (13:50 GMT), benchmark copper futures on the London Metal Exchange had fallen by 0.3% to $9,560.05 a ton, but are over 9% higher so far this year. The COMEX copper contract traded 0.4% lower at $4.6880, but is 16% higher over the course of 2025.
Copper has been given a boost by indications that the metal will be next on U.S. President Donald Trump hit list, with a WSJ article this week noting that he said he would impose "25% tariffs on imports of aluminium, copper… ", the first time 25% had been mentioned in relation to copper.
The COMEX contract now trades at a 10-12% premium over LME, Morgan Stanley added.
“With tariffs not yet imposed though, there is a strong incentive to send metal to the US, tightening Rest of the World markets too,” Morgan Stanley said.
Additionally, physical signals are improving: After being in a $100-150/t contango since late 2023, the cash-3m LME copper spread is now around 0.
“Being long a commodity in contango can be challenging, as the futures price "rolls down" to spot, but in backwardation it can "roll up", so the switch can often drive investor inflows,” Morgan Stanley added.
Supply is also still tight: We count around 250,000 tonnes of guidance downgrades year-to-date, slightly ahead of normal if 2024 is excluded.
“Chile’s copper output also fell 24% month-on-month in January to the lowest level in 9 months, a larger-than-normal drop,” Morgan Stanley added.
“We stay constructive on copper, our preferred base metal. Fundamentals and price signals are positive, and inventories are tightening as metal gets pulled to the US. Tariffs may bring demand concerns in the future, but for now physical markets continue to tighten.”