When copper gets political the energy sector pays

Hey Reader, welcome to The Energy's weekly data newsletter. This week we look at the volatility of copper prices and its role in the transition.

Tariff time

US President Donald Trump’s 50% tariff on copper is due to come into force on Friday, though the plan remains scant on detail. We don’t yet know if all countries will be hit equally - America’s largest copper trading partner Chile is seeking an exemption in trade talks this week.

Australia is a top 5 exporter of copper, but less than 1% goes to the US. Still, experts say the move could destabilise global supply chains at a time when global copper markets are already facing geopolitical uncertainty and tight supply.

*Copper trade map. Australian Resources and Energy Quarterly June 2025*

Expert view

"The imposition of a 50% tariff on a globally-traded commodity like copper is exactly the kind of shock that can push markets into disequilibrium.

Non-technical risk premiums (NTRPs) - the additional return investors require due to geopolitical, regulatory, or policy uncertainty - are already rising for copper. The Trump tariff, justified via a “robust national security assessment”, effectively hard-codes policy risk into the price of copper.

For investors, this translates into higher capital costs, project delays, and underinvestment - just when demand is set to soar.”

Joaquin Vespignani
Associate Professor in Economics and Finance, University of Tasmania

Critical to the energy transition

When the Australian government issued its 2023 Critical Minerals Strategy with a view to 2030, few would have foreseen the geopolitical environment now facing the world as the US embraces protectionism.

But back then Australia did step up its focus on minerals deemed important for the global transition to net zero.

*Minerals used in clean energy technologies. Source: International Energy Agency*

In 2023, copper was added to a new Strategic Materials List, one of a group where supply chains were not then seen as “vulnerable enough to meet the criteria for the Critical Minerals List”.

Copper supply has been ample in recent years, however the International Energy Agency is forecasting a shortfall from 2030.

A major copper supply deficit is expected later this decade.
Source: IEA Global Critical Minerals Outlook 2025

Flow-on effects

Copper prices have been riding a rollercoaster in the wake of Trump’s early threats and walk-backs on tariffs, on the back of growth of more than 70% since 2020.

The IEA estimates key commodities and freight costs make up about 15% of total utility-scale solar PV and onshore wind investment costs.

And higher prices won’t just mean more expensive solar panels and wind turbines. Copper is also a major component in transmission networks and data centres.

Mind the gap

So if copper is so important and there’s a supply crunch looming, why is one of Australia’s last remaining copper smelters about to close?

The answer lies in the global gap between mine output and refining capability - smelters have a lack of copper concentrate to refine. This gap has pushed down refining prices to unprecedented lows. And China, a dominant refiner, has pulled out all stops to ride out this downturn, albeit seeing many of its own smelters shuttered.

Price volatility this year hasn’t helped given many smelters make most of their revenue from long-term contracts around a benchmark price which has been falling as investors look to the longer-term.

China is expected to maintain its dominance in copper refining
Source: IEA Global Critical Minerals Outlook 2025

A strategic opportunity

Energy economist Joaquin Vespignani says the looming tariff landscape could shift US procurement preferences toward refined copper and alloy products from within its strategic bloc.

This would make Australia’s limited refining capacity a competitive disadvantage.

“Investment in value-added copper processing, such as wire, cathode, or cable production, would enhance Australia’s leverage in future trade negotiations,” Vespignani says.

He also recommends Australia include copper in its proposed $1.2 billion Critical Minerals Reserve, with evidence stockpiles can help lower market-wide risk premiums, reduce price volatility, and enhance investment confidence.

Energy mix

With thanks to OnlyFacts

Last week (22 - 28 Jul) vs. same week in 2024:

Renewables: 42.2% (+3.3%)
Fossil Fuels: 57.8%

Over the past week, wind was the second-largest source of electricity in the NEM, supplying nearly a quarter of all consumption. Gas ranked second-lowest, only ahead of miniscule bioenergy. In contrast, the SWIS told a different story, with heavy reliance on gas. Utility-scale solar was so low it fell behind bioenergy.