UBS took note of a significant divergence in copper prices, with U.S. premiums over international rates experiencing a sharp increase.

The U.S. price of copper surged by 13%, outpacing the 8% rise observed at the London Metals Exchange (LME). This disparity has been attributed to the uncertainty surrounding US tariffs, which UBS anticipates will sustain the elevated price premium in the near term.

The research firm outlined the challenges associated with replacing refined copper imports with domestic production in the United States. It would be a difficult endeavor to undertake swiftly, as investments in US production and processing capabilities would require several years to reach full operational status.

UBS also expressed the view that the potential imposition of tariffs on U.S. copper imports could lead to greater price volatility in the coming months. This would occur as supply channels and domestic demand in the US adapt to the new circumstances. Despite this predicted short-term volatility, UBS maintains its stance on the longer-term structural imbalance narrative for copper.

In light of these developments, UBS has suggested a strategy that involves selling the downside price risks in copper to capture yield.

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