Copper Settles Near a Record High: Economic Indicator Status in Question

Copper, often referred to as “Dr. Copper” due to its historical accuracy in gauging economic conditions, has recently settled above $5 a pound on Comex, reaching levels not seen since May. While this may typically signal a robust economic outlook, the ongoing trade tensions stemming from the Trump administration’s tariffs have muddied the waters regarding copper’s role as a bellwether for industrial health.

The Drivers Behind Rising Copper Prices

The uptick in copper prices is largely attributed to supply concerns prompted by potential widespread tariffs on copper imports into the United States. As Natalie Scott-Gray, a senior metals demand analyst at StoneX, notes, the U.S. relies heavily on foreign copper, with imports constituting about 45% of its demand. Although Canada and Mexico have been exempt from tariffs under the USMCA (United States-Mexico-Canada Agreement), concerns remain high as an executive order from February calls for an investigation by the Commerce Department into the national security threat posed by copper imports.

Scarcity in supply, coupled with geopolitical uncertainty, has driven prices upward. On Tuesday, the most-active May futures contract on Comex closed at $5.02 a pound, marking a significant increase, while copper prices have soared over 23% in 2025 alone. According to Scott-Gray, a weakened U.S. dollar has further contributed to this price surge.

Comparative Pricing and Market Dynamics

The divergence between U.S. and global copper prices is telling. As of last Friday, the closing price for the three-month copper contract on the London Metal Exchange (LME) was approximately $4.436 per pound. This stark contrast underscores the high premiums associated with U.S. delivery, whose implications reflect heightened demand within the domestic market.

Scott-Gray pointed out that the current physical tightness on the LME indicates that traders are eager to secure copper units. This disparity can be attributed to the economic implications of tariffs as well as broader supply chain disruptions, leading to an environment of both scarcity and speculation.

Copper as an Economic Indicator: Long-Term vs. Short-Term Context

Despite the immediate pressures affecting copper prices, experts like Charl Malan, a senior metals and mining analyst at VanEck, maintain that copper can still serve as a reliable indicator of economic activity. He highlights that the unexpectedly high demand for copper from China underscores the prevailing health of the industrial outlook. Ultimately, copper’s value continues to reflect broader economic trends and supply-demand imbalances — though this clarity may be muddled in the short term due to current trade issues.

Scott-Gray elaborates that treatment and refining charges, known as TC and RC, have fallen significantly, further showcasing the “extreme mine supply shortage.” When these charges turn negative, it becomes evident that the pressures on supply are mounting, making copper increasingly valuable despite troubling tariff policies.

Investor Sentiment and Speculation

Interestingly, net speculative positions for copper on Comex remain relatively cautious. With positions indicating a near-neutral state and well below the levels observed during last year’s short squeeze, investors seem wary of how ongoing tariff developments may influence global trade and economic health. As Scott-Gray observed, current net speculative positions sit at 14,216—a far cry from the 75,000-plus levels seen last May, suggesting a prevailing caution amongst traders.

Conclusion: Cautious Optimism for Copper

While copper continues to trade near record highs, its reliability as an economic indicator has faced scrutiny amid the evolving landscape of U.S. trade policy. For serious investors focused on commodities and resource stocks, it’s essential to consider both short-term volatility driven by geopolitical factors and the long-term supply-demand fundamentals that ultimately underpin copper’s value. As the dynamics surrounding global copper trade evolve, informed stakeholders must weigh these complexities while navigating the commodity landscape.