The United States’ decision last week to exempt refined copper from import tariffs contrasted with its earlier move to impose steep duties on aluminum, highlighting the central role of electricity costs and the dynamics of lobbying pressure in shaping US policy.
Washington surprised the copper market by imposing taxes only on imports of semi-finished products such as wires, tubes, and sheets, while leaving refined metal untouched. Since the announcement last Wednesday, copper prices on Comex have fallen by more than 20%.
In contrast, refined aluminum shipped to the United States since June has faced a 50% tariff, as domestic producers contend with higher electricity costs compared to copper producers.
Tariffs on metal production fall under broader US efforts to revive domestic smelting capacity and reduce reliance on imports.
Century Aluminum was among the strongest advocates of these duties, arguing they are essential to protect what remains of America’s aluminum smelting industry. The company said in a June statement: “Century Aluminum applauds President Trump’s steadfast defense of domestic production of critical metals through raising aluminum tariffs to 50%.”
The exemption of refined copper, however, reflects its importance to US industry and the influence of the copper sector, including Freeport-McMoRan, which warned earlier this year that a global trade war could damage US copper production.
The company told the US government in a memo: “A global trade war could lead to slower economic growth… slower growth in the United States or globally would negatively impact copper prices, which could threaten the sustainability of the domestic copper industry due to its high cost structure.”
For aluminum, the main argument in favor of US tariffs relates to the share of energy in smelting costs. Macquarie estimates that energy represents about 50% of the cost of producing primary aluminum, compared with 30% for copper.
Macquarie analyst Marcus Garvey said: “There is no economic justification for building any new aluminum smelting capacity without significant intervention. Even with intervention, it may not be enough.”
Analysts note that one of the biggest challenges for potential investors in US aluminum smelting is the difficulty of securing long-term power purchase contracts at competitive rates, especially given higher energy costs in the United States compared to producing countries such as the UAE, Bahrain, and the world’s largest producer, China.
High electricity costs are the main reason the number of active smelters in the United States has fallen to just four today, compared with 23 in 1995.
According to US Geological Survey (USGS) data, US primary aluminum production totaled 3.35 million metric tons in 1995, fell to 1.6 million tons in 2015, and declined further to just 670,000 tons last year.
