Country Report South Africa 05 Aug 2025 (T08:06)

Abstract

The redirection of copper stocks in CME warehouses back into the LME network could generate short-term price pressure. [...]we expect global trade growth to decelerate more markedly from the second half of this year and into 2026 as the effects of high overseas inventories, US tariffs and slowing US and Chinese growth erode global demand. The large volumes of Russan metals held by LME warehouses could have broader implications if LME members reconsider their previous vote against an outright ban on Russian materials from its warehouse network. [...]we forecast that the euro area's real GDP will expand by 1.2% per year in 2025-26, and that copper usage in the EU will remain stable6.

Overview

• The US and China have extended their tariff truce to November 10th, delaying triple-digit duties but not resolving core disputes, leaving a high risk of renewed escalation once the pause expires.
• US-listed copper futures on the Chicago Mercantile Exchange (CME) plunged sharply on July 30th after the US president, Donald Trump, announced a 50% tariff on semi-finished product imports, but not refined copper cathodes.
• Copper consumption in the long term will be supported by green investment, infrastructure spending and China’s electric vehicles (EVs) push, but short-term demand faces headwinds from global policy uncertainty, geopolitical tensions and US tariff rises.
• EIU expects global refined copper output to grow by 2.1% annually in 2025–26, supported by high prices and new projects, but short-term supply remains tight owing to low treatment charges, delayed expansions, and rising environmental and geopolitical constraints.

Prices and markets

We expect the LME cash price to average US$9,531/tonne in 2025, up by 4.2% from US$9,148/tonne in 2024. This follows a period of intense price volatility driven by changes in US trade policy. On July 30th Mr Trump issued a proclamation announcing a 50% tariff on semi-finished copper products imports after months of uncertainty after launching a Section 232 investigation into the US copper market in February 2025. Crucially, however, raw materials such as concentrates and cathodes are excluded from the tariffs. The decision triggered a dramatic correction in CME copper futures, which hit a record high on July 24th, about US$3,200/tonne above the LME copper price. For the moment the LME cash price remains supported having hit a one-year high above US$10,200/tonne on June 27th. LME warehouse stocks are improving after they fell below 100,000 tonnes in late June. The redirection of copper stocks in CME warehouses back into the LME network could generate short-term price pressure.

The conclusion of a US-China trade framework in May—and its extension for another 90 days on August 12th—will not set the stage for a broader or more durable agreement. The new pause runs until November 10th, temporarily preventing punitive tariffs from rising to 145% (on Chinese goods) and 125% (on US goods). However, this extension is still unlikely to give both sides enough time to resolve deep-rooted issues relating to China’s market-distorting practices and the US’s investment and high-tech export restrictions.

We expect that the 10% universal tariff will remain in place throughout Mr Trump’s presidency, given that it was a core campaign pledge and is viewed by the administration as an important revenue-raising tool. Although a series of bilateral deals have been signed with the EU, Japan, Indonesia, South Korea and the UK, the window for tariff renegotiations has effectively closed, meaning that many sectoral tariffs will still revert to the higher levels announced in April. This will push the US weighted average tariff rate to its highest level in nearly a century, once the truce expires.

Front-loading tied to anxieties about looming US tariffs kept a floor under global trade activity in the first half of 2025. However, we expect global trade growth to decelerate more markedly from the second half of this year and into 2026 as the effects of high overseas inventories, US tariffs and slowing US and Chinese growth erode global demand. Nonetheless, we believe that the main themes—such as resource nationalism, stricter environmental regulations and the decarbonisation agenda—will continue to support copper prices in 2025-26, despite heightened uncertainty.

Recent developments suggest that the refined copper market will remain comfortably supplied during our forecast period. Various mine and smelter expansion projects are scheduled to start production in 2025-26, but risks remain as producers face greater headwinds owing to increased resource nationalism and stricter environmental oversight, particularly in Latin America. Despite the risk that inflationary pressures erode consumer spending, expansion of green-energy infrastructure and the electrification of the global automotive fleet will support demand. We expect that market conditions will tighten towards the end of our forecast period, which will lead to large annual deficits. This tightening is expected as continued underinvestment in future projects constrains supply growth, which could lead to shortages in the second half of the decade.

Copper stock flows are likely to increase owing to recent speculative tariff front-loading. LME stocks totalled 153,850 tonnes at the start of August, up from 90,6250 tonnes on June 27th, below the 100,000-tonne mark and their lowest since August 2023. LME Stocks set a five-year high of 322,950 tonnes on August 29th 2024 after rising from a low of 51,550 tonnes in mid-April 2023. LME stocks could now start rebuilding following the conclusion of the Trump administration Section 232 investigation into copper and the decision not to apply tariffs to raw materials.

Copper stocks are still accumulating in Chicago Mercantile Exchange-registered warehouses. They totalled 261,180 tonnes as at August 4th, up from 93,480 tonnes on February 28th. The large volumes of Russan metals held by LME warehouses could have broader implications if LME members reconsider their previous vote against an outright ban on Russian materials from its warehouse network. In China, the Shanghai Futures Exchange (SHFE) registered total copper stocks of 72,543 tonnes, down from 235,296 tonnes on March 28th. We expect China to account for more than 47% of global re?ned copper production by 2026.

Demand

We expect that a number of factors will continue to support consumption of refined copper in 2025-26. The two largest economies in the world, the US and China, are proving resilient in the face of trade disruptions, and we have raised our forecasts for both economies for 2025. Nonetheless, demand for copper cathodes will be constrained in the short term. The level of trade uncertainty remains elevated and will continue to weigh heavily on investment and consumption decisions. Export front-loading supported China’s economy in the first half of 2025, but momentum across the second half will depend on the effectiveness of policy support. US economic activity is moderating amid policy uncertainty, but will be partly counterbalanced by Europe, where we forecast a stronger fiscal impulse and greater appetite to implement productivity-related reforms. Global interest-rate cuts may pause at times, and rates are unlikely to fall back to past low levels. More broadly, we think that investments to support decarbonisation will accelerate copper demand in 2026.

The Iran-Israel crisis is the latest setback for the world economy; more worryingly, this heralds an era of rising interstate conflict. This has been highlighted recently by recent India-Pakistan military clashes and the increasing risk that the Russia-Ukraine war will drag on beyond 2025. Constraints on geopolitical brinkmanship are weakening as rules related to territorial sovereignty erode. Nonetheless, we believe that geopolitics will drive some important changes in the global economy, and many states will face difficult choices, given that we expect US relations with China to deteriorate as the two superpowers tussle over economic and strategic issues.

Global protectionism adds to the list of obstacles that will disproportionately affect emerging markets, including higher geopolitical risk, advances in artificial intelligence (AI) that are likely to accrue in capital-rich advanced economies, and the disruption anticipated from climate change. Some economies will thrive, however, such as those that possess critical minerals that are vital to AI and green technology, and those that position themselves through business reforms to act as credible alternatives to China
for manufacturing.

China will remain pivotal to copper demand, as it accounts for more than 50% of global consumption. We expect that targeted support will continue to underpin China's copper consumption, despite the slump in its property sector in recent years. Officials are progressing the urbanisation agenda to reduce rural poverty, which, coupled with the rapid expansion of the EV market, will support demand. The authorities are accelerating investment to upgrade and expand the electrical grid to optimise the rapid expansion of renewable energy capacity. This outlook is not without risks, however, as China's growth will be hampered by US tariffs, particularly related to EVs and clean-energy technology, and the likelihood that stimulus and reform actions will remain conservative. We expect China’s economic growth to fall short of the official 5% target for this year, despite the authorities' efforts to stimulate domestic demand. We forecast a slowdown in real GDP growth from 5% in 2024 to 4.7% in 2025. More broadly, China's ambition to become carbon-neutral by 2060 will support long-term demand.

In Europe, US sectoral tariffs and the threat of future reciprocal and additional sectoral levies will result in tepid growth in 2025. The dramatic changes in US trade and security policy are driving more radical decision-making in Europe, but the positive effects of Germany’s pivot to fiscal expansion in relation to infrastructure and defence will lift growth. As a result, we forecast that the euro area's real GDP will expand by 1.2% per year in 2025-26, and that copper usage in the EU will remain stable6. In the long term, investment in infrastructure to decarbonise road transport will continue to accelerate. The European Commission expects 3.5m EV charging points to be installed by 2030. Consumption could also be bolstered by accelerated green-energy investment plans under the RePowerEU initiative, which is designed to improve energy security and green the bloc's power sources. Trade tensions between the EU and China remain a longer-term challenge, particularly after the Commission decided to impose provisional countervailing duties on imports of EVs manufactured in China.

We forecast modest positive growth in the US this year. Even with recent modest steps towards tariff de- escalation, uncertainty will persist as questions around US trade policy weigh on consumer and business confidence. Laws enacted under Joe Biden, the previous president, such as the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) will continue to support US copper demand in 2025-26. However, their impact on copper demand will be smaller since Mr Trump signed the “One Big Beautiful Bill Act" on July 4th, which cuts subsidies for EVs and renewable energy projects. Nevertheless, incentives for the domestic and regional production of technologies considered strategic (including semiconductors and batteries) will remain central to industrial policy. The decision to apply 50% tariffs to imports semi-finished copper products may further bolster domestic demand if it encourages increased fabrication capacity. So too could the threat of phased import duty on refined copper from January 1st 2027 following the Section 232 investigation. Lower interest rates will go some way to supporting the economy, but the risk that tariffs will stoke inflation means that the Federal Reserve (Fed, the US central bank) is likely to delay responding to early signs of labour market deterioration, waiting until September to resume the easing cycle that it paused in January. Overall, we forecast that US copper consumption will increase by an average of 1.9% per year in 2025-26.

Supply

We expect global refined copper production to expand by an average of about 2.1% per year in 2025-26. Near-record prices and expectations of rapid demand growth to satisfy the green transition and technology change have started to incentivise producers to respond. However, short-term risks appear skewed to the downside. Benchmark treatment charges for 2025 have been agreed at their lowest level in at least 20 years as miners struggle to match the rapid expansion of global smelter capacity. Various mine expansion projects are due to enter production in our forecast period, but these are unlikely to materially improve availability in the global concentrates market—at least not as much as expected. In March 2025 Mr Trump issued an executive order designed to fast-track mining projects.

The Section 232 investigation has concluded. Controls governing the domestic sales for copper input materials and high-quality copper scrap are designed to encourage the development of smelting capacity in the US. However, global benchmark prices are likely to remain more influenced by supply-demand fundamentals than US policy alone. Furthermore, several major copper miners have lowered their production outlook for 2025 to reduce costs and preserve their mineral resources. Other factors such as environmental oversight, resource nationalism and trade tensions will continue to pose challenges in the long term. As a result, we expect refined metal production to slow and, in turn, tighten the underlying market fundamentals later in the decade.

China's contribution to the pace of global refined copper production will remain crucial, as the country is the world's largest importer of raw materials, a leading producer of cathodes and has the largest smelting capacity. China plans to add more smelting capacity in our forecast period as the National Development and Reform Commission (NDRC) and other government bodies aim to increase non-ferrous metal production. The creation of the state-backed China Resources Recycling Group (CRRG) will help with the development of a national platform for recycling and reusing resources as officials attempt to generate a circular economy; however, downside risks remain. Reports in March 2025 suggest that a number of major smelters are conducting maintenance ahead of schedule, owing to poor margins and tight raw material supplies. Restrictions on scrap remain, and trade tensions with the US, which accounts for about one-fifth of China's scrap imports, could increase reliance on copper concentrates. This would leave smelters more susceptible to disruption, either owing to energy costs, treatment charges or supply-chain issues. Beyond these, tighter environmental standards designed to reduce heavy-metal emissions will drag on refined copper production growth towards the end of our forecast period.

Outside China, notable smelter projects are scheduled in India, supported by a government strategic plan to attract foreign direct investment (FDI) to develop domestic mine and smelting capacity. Other capacity additions are scheduled in the US and Uzbekistan. A number of projects are being developed to generate additional value-added production. In the Democratic Republic of Congo (DRC), Ivanhoe Mine is set to activate a 500,000-tonnes/year (t/y) smelter at the expanding Kamoa-Kakula complex. In Indonesia, US-based Freeport-McMoRan commenced production at its new Manyar smelter in July, but the ramp-up faces a multi-month delay following a fire in mid-October. In Europe, the inclusion of copper as a “strategic" material under the Critical Raw Materials Act (CRMA, the EU's response to the US's IRA) could support the development of mining, processing and recycling capacity in the region. High-frequency indicators suggest that the availability of raw materials has tightened dramatically since December 2023, as smelter expansions outpace mine capacity additions.

According to reports, a Chilean miner, Antofagasta, agreed benchmark treatment charges (TCs, the fee paid by miners to a smelter for converting concentrate into refined metal) terms to supply Chinese smelters for 2026 at zero. This would represent a further decline from the annual terms agreed in December 2024 with a Chinese smelter, Jiangxi Copper, at US$21.25/tonne—a drop of 73% from the US$80/tonne agreed for 2024. The reduction reflects the scale of smelter demand and tight availability of material, although it remains to be seen whether this benchmark will be accepted by the broader market. Spot TCs recorded a new multi-year low in late June 2025 amid strong stocking from smelters.

Copper-concentrate supplies will be crucial in supporting expanding smelting capacity in the coming years. We estimate that global copper mine production reached 22.9m tonnes in 2024, up by 2.1% on the previous year, driven by expansions in mining operations across countries including Chile, DRC, Russia, Zambia and China. This growth builds on the estimated addition of 2m t/y of mine capacity in 2022-24 and will be further supported by an additional 1m t/y of capacity projected for 2025-26. In Chile, mining output is set to increase as new projects come on stream; in particular, the sector will benefit from the ramping-up of activity at the US$8.2bn Quebrada Blanca Phase 2 copper project, which has a production capacity of nearly 320,000 t/y. In Peru, the government approved the expansion of the Las Bambas mine. Work to expand capacity at the Kamoa-Kakula mine, coupled with the Tenke Fungurume Mine (TFM) expansion, will continue to bolster production in the DRC in 2025. The underground expansion at the Oyu Tolgoi mine in Mongolia (a joint venture between UK-based Rio Tinto and the Mongolian government) will raise production towards the end of our forecast period.

However, risks still remain. Glencore, a major global commodity trader and miner, is reviewing its smelting operations, which could lead to some capacity being shut down. More extreme weather events, tighter environmental oversight, and broader political and social unrest could result in greater disruption in the longer term. Mergers, acquisitions and joint ventures among copper mining companies are multiplying as major players seek to increase supply for the energy transition and address the relative underinvestment in new mining projects in previous years.

Resource nationalism also poses a significant headwind. Current developments are centred on Panama, where Canada-based First Quantum Minerals has initiated international arbitration after the government declared that the 300,000-t/y Cobre Panamá mine would be shut down. In May 2025 authorities approved a maintenance plan, funded through the sale of stockpiled materials. Despite the decision, mine operations remain suspended, although the Panamanian president, José Raúl Mulino, is considering reopening one mine, according to media reports in April 2025.