Copper Prices Decline as Investors Monitor Prospects for Diplomatic Resolution to Iran Conflict

Copper Edges Lower Amid US-Iran Ceasefire Talks

Copper prices edged lower on Tuesday as traders eyed the prospect of peace negotiations between the US and Iran, with the two countries considering extending their ceasefire by another two weeks to allow more time to negotiate a peace agreement.

According to a person familiar with the matter, mediators between the warring sides are trying to set up technical talks to resolve the most contentious issues, including reopening the Strait of Hormuz and Iran's nuclear enrichment. This development has had a significant impact on the base metals market, with most metals experiencing whipsawed prices since the conflict erupted.

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Chinese fabricators have stepped up purchases after domestic copper prices fell below 100,000 yuan a ton in recent weeks due to the war, leading to a significant drawdown in domestic inventories. Despite the near-term economic impact of the energy crisis, the sharp shock could also prove beneficial for the metal's long-term growth as economies pivot toward electrification.

Trafigura Group analyst Henry Van said at an industry conference in Santiago that the energy crisis could supercharge the metal's long-term growth, with a bigger incentive than ever before to do more electrification and insulate energy consumption from geopolitical shocks.

Nicholas Snowdon, chief metals economist at Mercuria Energy Group Ltd, expects copper to return to record highs this quarter as China "puts the foot down" on purchasing for its electricity grid. Mercuria sees "intense global competition" for copper cathode, with record high prices a matter of when not if.

The copper market is also weighing the prospect for a further rush to import copper to the US, after front-month prices on New York's Comex exchange rose to a premium of $283 a ton above those on the LME this week, the highest since December. US President Donald Trump's planned tariffs on copper imports into the country led to a surge in Comex prices last year and enabled traders to make huge profits shipping copper into Comex warehouses in the US.

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Investors still expect a decision on tariffs for refined copper by the end of June, when the Department of Commerce is set to deliver an update on US copper markets.