President Trump is at it again… This time he’s threatening critical minerals, like copper imports into the USA with a 50% tariff. What he hopes to achieve with this is a mystery to me. Copper is a vital metal for US industry in general. But then again, maybe it’s all bluff and bluster. Either way, copper prices soared. Of course, Trump’s main goal is to protect US producers and secure supply of the critical mineral.
But there’s a tiny problem…
As I explained earlier this year in MoneyMorning:
US copper producers will have to significantly boost domestic production to meet demand.
According to the US Geological Survey (USGS) and Mining Data Online (MDO), the US is the sixth largest copper producer in the world with 1.1 million tonnes. That’s a far-cry from its biggest adversary, China’s, 1.8 million tonnes.
It’s also nowhere enough to meet its own annual copper consumption needs of +1.8 million tonnes. That’s why the US imports 38% of its copper needs, according to a January Reuters report.
So, American producers will somehow have to boost annual domestic production by 700-plus tonnes. And recycled copper won’t bring enough new supply into the system. So, the only alternative is to dig more out of the ground – which is far from easy today.
Rich copper deposits are getting harder, and more expensive, to find. Moreover, the increased scrutiny of mining’s social and environmental standards has raised production costs and placed more barriers to expansion.
And of course, we need higher copper prices to incentivise miners to produce.
Simply put – long-term demand and supply expectations remain incredibly bullish for copper. Now’s the time to start adding copper miners to your watch list if you haven’t already. We could start seeing price breakouts in the coming weeks.
Copper isn’t the only critical metal Trump’s looking to secure
The US government just became the largest shareholder in a rare earth supplier…
I’ve spoken about MP Materials (NYSE:MP) in previous MoneyMorning articles. And if you’re a South African Investor subscriber, in April’s issue, you would’ve read why I thought the company was a great buy.
As a recap, MP owns and operates the only significant rare earths mine and processing facility in the US. The company is also developing a rare earth magnet production facility in Fort Worth, Texas, which it expects to be producing finished neodymium-iron-boron magnets by the end of this year.
On Thursday, the company’s share price jumped 50% after announcing two big wins.
Firstly, the US Department of Defence (DoD), JPMorgan, and Goldman Sachs are teaming up to pour over $1 billion into MP’s US-based rare-earths mining operations expansion.
Under the agreement, MP will construct a second domestic magnet manufacturing facility “at a soon-to-be-chosen location to serve both defence and commercial customers.”
The new facility is expected to be commissioned in 2028 and bring MP Materials’ total rare earth magnet manufacturing capacity to roughly 10,000 metric tons.
Even bigger — the DoD will buy $400 million of new preferred MP stock with warrants for more. The total would come out to be around 15% of MP’s stock, which would make it the top shareholder in the company. Additionally, the DoD agreed to a 10-year customer commitment.
The move comes amid trade tensions with China, and more importantly, the race to secure a domestic supply chain for rare earths’, which are crucial for automobile, robotics and other high-tech gear.
I expect the critical minerals mega trend to heat up – and that means, more money-making opportunities. Follow South African Investor for more.
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