Summary of J.P. Morgan's Metals Weekly Report on U.S. Copper Tariffs Industry Overview - The report focuses on the U.S. copper market and the implications of a proposed 50% tariff on copper imports, set to begin on August 1st, 2025 [1][3][5]. Key Points and Arguments Tariff Impact on Demand - A full pricing of the 50% tariff could lead to a 4% reduction in refined copper demand growth in the U.S. for the next year [1][13]. - U.S. copper demand constitutes only 6% of global demand, meaning a 4% decline in U.S. demand translates to approximately 0.2% of global demand [1][24]. - Current U.S. all-in copper prices are up by around 30% compared to the 3Q24 average, indicating a potential drag on demand growth of about 2.5% in the following year [19]. Supply Chain Dynamics - The U.S. exports 540-580 thousand metric tons (kmt) of copper contained in scrap annually, which could help reduce the 600-700 kmt import dependence on copper cathode [1][32]. - A scrap export ban could significantly harm the domestic scrap supply chain, shrinking the industry before it has a chance to grow [1][32][48]. - The U.S. has substantial copper project potential (~3 million metric tons per annum), but significant supply responses from new mines are not expected until the next decade due to long lead times [1][49]. Price and Market Reactions - The COMEX/LME arbitrage has remained static, with the premium of the September COMEX contract hovering between 25% and 28% [3]. - The anticipated tariff is expected to create a bearish pressure on LME prices in the second half of 2025, despite supportive medium-term fundamentals for copper prices, which are expected to remain above $9,000/mt [5]. Future Supply Considerations - The easiest way to increase U.S. primary copper supply is through solvent extraction/electrowinning (SX/EW) operations, which do not require additional smelting and refining infrastructure [1][51]. - The average lead time for mining projects in the U.S. is around 19 years, longer than the global average of 15.5 years, complicating the timeline for new supply [58]. Substitution and Demand Destruction - The report notes that both copper and aluminum are facing 50% tariffs, which diminishes substitution pressure between the two metals [25]. - Higher prices for both metals could lead to broader demand destruction rather than significant substitution trends [26]. Conclusion - The report suggests that while the proposed tariff will create challenges for U.S. copper demand and supply, it may also present buying opportunities for long-term investors as prices are expected to stabilize above $9,000/mt [5]. Additional Important Insights - The potential for exemptions from the tariff for countries like Indonesia could significantly impact U.S. copper import dynamics [4]. - The health of the U.S. manufacturing and construction sectors will continue to be the primary drivers of copper demand, alongside structural trends in utilities and data center builds [20]. This summary encapsulates the critical insights from the J.P. Morgan report regarding the implications of the U.S. copper tariffs on demand, supply, and market dynamics.