Copper Settles Near Record High: Why It’s Not a Great Economic Indicator Anymore

As copper prices soar above $5 a pound for the first time since May, many might interpret this as a sign of economic strength. However, the reality is that the metal’s role as an economic indicator has been obscured by the ongoing trade war initiated by the Trump administration. Dubbed “Dr. Copper” for its ability to gauge economic health, copper’s recent price surge is primarily driven by supply concerns rather than enhanced demand.

Prices Reached New Heights

On Comex, copper futures for May settled at $5.02 a pound, marking the highest finish since May 21 of the previous year when prices peaked at $5.106. This surge represents a more than 23% climb from the beginning of 2025. The increase is noteworthy; however, analysts caution that the traditional interpretation of rising copper prices indicating economic growth may not hold true in the current climate.

Influence of Trade Policies

Natalie Scott-Gray, a senior metals demand analyst at StoneX, explains that copper’s price increase is substantially influenced by supply issues tied to potential tariffs on imports. The U.S. is heavily dependent on foreign copper, with imports fulfilling around 45% of demand. Under the United States-Mexico-Canada Agreement (USMCA), copper from neighboring Canada and Mexico remains exempt from these tariffs, but ongoing investigations into the threat of copper imports to national security could lead to new trade restrictions.

Tariff Investigations and Market Uncertainty

In a recent executive order, President Trump instructed the Secretary of Commerce to investigate copper imports and proposed measures such as tariffs, export controls, or incentives to advance domestic production. This shifting landscape has contributed to the uncertainty affecting copper’s reliability as an indicative economic barometer, according to Scott-Gray.

Currency Values and Global Supply Dynamics

Another factor contributing to the spike in copper prices is the weakness of the U.S. dollar. The discrepancy between prices on the U.S.-based CME Group and the London Metal Exchange (LME) highlights supply concerns. As supply tightens in London, market participants are racing to secure their copper units. The closing price for copper on the LME recently stood at $4.436 per pound, significantly lower than the Comex price, indicating a burgeoning premium for U.S. delivery.

Long-term Prospects for Copper

Despite current market volatility and the overarching effects of trade policies, experts believe copper retains its status as a valuable economic indicator over the long haul. Scott-Gray affirms that LME copper prices provide insight into the global industrial outlook, reflecting a universally rooted demand.

Charl Malan, a senior metals and mining analyst at VanEck, concurs with this assessment, noting surprising resilience in Chinese copper demand. He cites various supply and demand factors contributing to rising prices, including the extreme shortage of mine supply, reflected in negative treatment and refining charges (TC and RC).

Investor Sentiment and Cautious Positions

Notably, copper’s speculative net positions on Comex—which indicate the difference between long and short positions held by non-commercial traders—remain neutral and significantly below the levels observed last May during a short squeeze. Recently, net speculative positions recorded at 14,216 are a far cry from the 75,000-plus levels seen in May 2022. This cautious investor sentiment reflects concerns regarding the potential adverse impacts of higher tariffs on global industrial health and trade.

Conclusion

While the high price of copper might suggest buoyancy in economic activity, a deeper analysis reveals that its predictive capacity as an economic indicator is hampered by geopolitical complexities and domestic trade policies. Investors and analysts alike must navigate this altered landscape with an eye toward both immediate supply concerns and long-term geopolitical dynamics. As trade policies evolve, so too may the opportunities and challenges facing not only copper but the broader industrial sector.