Quarterly Analysis: Copper Prices Q2 2025 Recap
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In the second quarter of 2025, the copper market experienced unprecedented volatility, with prices reaching record highs and plunging to new lows. This turbulence was primarily driven by ongoing tariff threats between major economies, most notably the China-US trade conflict.
The looming threat and partial implementation of U.S. tariffs, such as the "Liberation Day" tariffs announced on April 2, 2025, and the subsequent tariff war with China, created significant uncertainty and speculative trading in a chaotic global economic environment.
One of the key factors that contributed to this volatility was the tariff-related uncertainty and trade tensions. Traders reacted to tariff news with rapid price moves, including copper's drop from an all-time high of $5.22 per pound in late March to about $4.06 in early April, followed by a quick recovery above $4.50.
Another significant factor was market psychology and price thresholds. Copper prices breaking key psychological levels, such as the 80,000 yuan/metric ton mark, amplified volatility through automated trading triggers and stop-loss orders. These price points influenced both human and algorithmic market behavior, causing sharp corrections and rebounds.
Supply-demand imbalances and inventory movements also played a crucial role. Despite some cooling in global demand, especially in Chinese infrastructure spending, supply constraints remained tight. Physical market tightness, evident from significant warrant outflows and shifting inventories between LME and COMEX warehouses, helped support higher prices.
Speculation amid uncertain macroeconomic outlook was another factor that drove rapid price fluctuations. Fear of a global recession and shifting economic forecasts led investors and traders to adopt speculative positions, further exacerbating the market's volatility.
Regional variations and sector influences were also evident. While Chinese inland regions showed weaker demand due to underperforming government stimulus, coastal manufacturing hubs remained resilient. Growth in renewable energy sectors also provided underlying support, offsetting broader demand weakening.
The volatility and high price of copper in Q2 2025 were not limited to the commodity market alone. The uncertainty seeped into the US bond markets, causing yields on the 10-year Treasury to rise sharply to 4.49 percent. Over two days, more than $6 trillion was wiped from the markets, the most significant such loss in history. The US Dow, S&P 500, and Nasdaq indices lost 9.5 percent, 10 percent, and 11 percent respectively due to the tariffs.
Despite the challenges, some positive signs emerged. Analysts like Jacob White, ETF product manager at Sprott Asset Management, believe the copper market may have entered a supply deficit in 2025. The ICSG suggested a 3.3% increase in copper usage in the first quarter of 2025, and countries like Peru accounted for a 5% year-on-year growth in mining production.
In response to the market turmoil, Trump announced a 90-day pause on the retaliatory tariffs on April 8, 2025, and later announced a 50 percent tariff on all copper entering the US on July 8, 2025. The rising rates came as China and Japan both sold holdings back into the market in an attempt to counter Trump's trade plans.
China, the DRC, and Asia were the main contributors to the increased refined production, with mining production of copper rising 2% in 2025 and refined production increasing by 3.2%.
In conclusion, the Q2 2025 copper market was a testament to the interconnectedness of global markets, where tariff concerns, market psychology, supply dynamics, and economic uncertainty combined to create a volatile and high-price environment.
[1] [Economist, The] (2025). Copper's wild ride. [online] Available at: https://www.economist.com/business/2025/07/10/coppers-wild-ride [Accessed 2025-08-01].
[2] [Reuters] (2025). Copper prices surge to record high as trade tensions spark speculation. [online] Available at: https://www.reuters.com/article/us-copper-prices/copper-prices-surge-to-record-high-as-trade-tensions-spark-speculation-idUSKCN25923L [Accessed 2025-08-01].
[3] [Bloomberg] (2025). Copper Plunges as Trump Announces 50% Tariff on Imports. [online] Available at: https://www.bloomberg.com/news/articles/2025-07-08/copper-plunges-as-trump-announces-50-tariff-on-imports [Accessed 2025-08-01].
[4] [Financial Times] (2025). Copper's surge shows how tariffs can distort markets. [online] Available at: https://www.ft.com/content/a46774e2-74f7-445c-871d-1f7b88d909b4 [Accessed 2025-08-01].
The tariff announcements and trade conflicts between major economies, such as the U.S., greatly impacted the finance industry, causing significant fluctuation in the stock markets, as evident by the losses in the US Dow, S&P 500, and Nasdaq indices.
The volatility in the copper market, which reached unprecedented highs and lows in Q2 2025, also presented opportunities and risks for financial institutions, particularly those in the trading sector, due to the speculative nature of copper prices.
