US copper prices are expected to remain volatile in 2025 because of uncertain market conditions, including Chinese demand, electric vehicle (EV) rollouts and falling borrowing costs.
Following a two-year downturn prompted by China's economic slowdown in the wake of the Covid-19 pandemic, the next active price on the Chicago Mercantile Exchange (CME) hit an all-time record high of $5.106/lb on 21 May 2024.
Expectations of increased demand in China, the prospect of looming US interest rate cuts, and projected ramped-up demand for copper in EVs and the green energy sector fueled copper price gains into the mid-year. These expectations proved partly exaggerated, leading copper to fall back to an average of $4.33/lb over the second half of 2024.
US copper market participants expect those same factors, albeit to varying degrees, to retain a prominent role in determining prices for 2025.
Macroeconomic uncertainties
Suppliers and consumers widely expect volatility to persist in the global copper trade as broader macroeconomic factors — chiefly Chinese demand and stimulus, US Federal Reserve interest rate decisions — and delayed US EV ramp-up plans pull the market in diverging directions.
President-elect Donald Trump's pledge to implement import tariffs have further complicated the picture for US participants, with likely retaliatory tariffs clouding the picture even more. Trade disagreements and tariffs would not only raise costs but also curb demand as the flow of various goods is dented, market sources said.
Meanwhile, US Federal Reserve policymakers on 18 December signaled they are likely to cut the target rate by only 50 basis points next year, paring back their expectations from a prior 100 basis points as inflation remains sticky. The DXY dollar index, which tracks the greenback against six major currencies, surged after the Fed announcement to its highest in two years.
A strong dollar puts downward pressure on copper prices because it tends to weaken demand from holders of other currencies. Tariffs are also expected to spur inflation and may prompt the Fed to further slow the pace of rate cuts, or even hike rates, effectively lending support to the dollar, making it more expensive for holders of other currencies to buy into copper.
The US Dollar index, DXY, surpassed 108.2 on 19 December, the highest since November 2022. Goldman Sachs has forecast that the greenback will remain strong in the near-term.
Automakers slow EV transition
Although the green energy transition — generally covering solar, wind, and EV markets for copper markets — is expected to contribute to US consumption of copper, automakers have signaled their interest in delaying EV deployments.
Wind and solar markets are widely expected to remain growth sectors with US projects and installations scheduled to rise next year. Still, the picture for EVs, which could ultimately contribute to copper demand heavily, is murkier. EVs utilize copper in motor coils for engines, and the cabling for charging stations among other components, and each EV requires 183 lbs of copper, nearly four times more than equivalent internal combustion engine vehicles.
Several automakers, including GM, Ford and Toyota, have either delayed EV plans or shifted more towards hybrids instead this year.
Price outlooks diverge
Market participants broadly expect the copper market to slide into a deficit by 2026, chiefly because of growing demand from the renewable sector but until then are split on the direction of prices.
The CME next active month price through November averaged $4.24/lb in 2024, up from a $3.86/lb average for the same time period in 2023.
Investment bank Goldman Sachs said copper prices will average $4.61/lb for 2025, forecasting upside risk from potential further stimulus while simultaneously seeing downside risk from likely US-China trade tensions.
Other financial organizations have forecast copper to range from $3.97-4.99/lb in 2025. Citigroup forecast copper at $3.97/lb, Bank of America dropped its outlook to $4.28/lb while UBS was at $4.76-$4.99/lb.
Most copper traders and analysts agree that 2025 will likely be a year of transition for the red metal market, buffeted by ongoing uncertainty.
