Freeport-McMoRan and the copper futures price are both shaking off a weak Chinese manufacturing report on Tuesday, as investors look ahead to prospects that President Donald Trump will slap a tariff on imports of the red metal. FCX stock and the United States Copper Index Fund are closing in on new entry points.
The near-term copper futures price surged to a record high of around $5.20 a pound in March, as firms raced to get ahead of a Trump tariff on copper. Then came the April 2 "Liberation Day" tariffs, followed by a back-and-forth escalation between the U.S. and China that lifted tariffs on each over 100%, sinking two-way trade.
After diving about 20%, copper regained its footing in the lead-up to the U.S.-China trade truce on May 12. On Monday, despite each side accusing the other of violating that truce, copper futures rose more than 3% to around $4.85 a pound. Futures fell 0.5% on Tuesday.
Trump Tariff News: Copper Implications
Last Wednesday, the U.S. Court Of International Trade ruled that Trump exceeded his authority in enacting the April 2 reciprocal tariffs aimed at trading partners, which he painted as a way to balance out other countries' unfair practices. Just one day later, a federal appeals court put that ruling on ice, at least temporarily.
While the trade court's ruling has clouded the outlook for country-by-country tariffs, it left the door open for further sectoral tariffs justified on national security grounds. On Friday, Trump charged through that door, announcing that he would double Section 232 tariffs of 25% on steel and aluminum imports on June 4.
In February, Trump ordered the Commerce Department to study the merits of copper tariffs under the same authority: Section 232 of the Trade Expansion Act. A report is due no later than November and could include a recommendation of tariffs.
While renewed tensions between the U.S. and China could be negative for the Chinese economy, which accounts for about 50% of global copper consumption, the good news is that Trump isn't threatening to jack up tariffs again, at least not yet. Reports indicate that Trump may speak to Chinese President Xi Jinping on Friday.
Deutsche Bank Touts FCX
In a Monday note, Deutsche Bank analyst Liam Fitzpatrick noted the likelihood of a "more protectionist approach" to come out of the copper investigation. He reiterated a buy rating on FCX stock with a 46 price target.
"FCX is a clear beneficiary compared to global copper peers," Fitzpatrick wrote, noting that domestic production accounts for one-third of its copper output.
Fitzpatrick's base case is for a 10% Trump tariff on copper, which would add $600 million to earnings before interest, taxes, deprecation and amortization, he estimates. A 25% tariff would add $1 billion to annual EBITDA vs. the base case, he says.
FCX, CPER
FCX stock is up 0.5% to 40.34 on Tuesday, taking a breather after it jumped 4.3% on Monday. A move past its 200-day moving average, now 40.89, would provide a break of its downtrend and offer an aggressive entry point. FCX stock hit a 13-year high in May 2024 just above 55, so there's a lot of overhead supply.
CPER is off 0.1% at 30.35 after Monday's 3.4% jump. The copper-price ETF has a 30.79 cup-with-handle buy point.
