Copper prices are in a precarious situation! Analysts: Following the historical largest single-day drop, prices may further decline.

The price of copper has just experienced the most brutal day in history. However, with the weak US economy and the historical price trends of commodities, this means that there may be further room for copper prices to fall. On Wednesday, the Trump administration announced long-awaited copper-related tariffs. Although this round of tariffs did not cover as much as the market originally feared, only including semi-finished products such as copper sheets and wires, and excluding copper ore raw materials and scrap copper, this news still triggered massive selling by investors. Previously, to avoid potential taxation risks, many investors in the United States hoarded copper in large quantities, hoping to profit and exit before the tariffs came into effect. According to Dow Jones market data, the price of near-term copper futures on the New York Commodity Exchange (COMEX) fell by 22% on Wednesday, plummeting by $1.24 per pound to $4.33, marking the largest single-day drop since records began in 1968. Copper mining company stocks also suffered heavy losses. This week, shares of Southern Copper Corporation (SCCO.US) fell nearly 7%, and Freeport-McMoRan Copper & Gold (FCX.US) fell by 11%. Despite the significant market pullback, some analysts believe that this decline also has a side of "rational return". Due to the escalating trade tensions, copper traders have aggressively purchased local copper resources in the United States, causing the price of American copper to rise by about 40% so far this year. On the eve of the announcement of the tariffs, the trading price of near-term copper futures on the American COMEX exchange was once nearly 30% higher than similar contracts on the London Metal Exchange (LME). However, with the announcement of the "lower than expected" tariffs, this premium was quickly erased, and by Friday, the price difference between the two had narrowed to about 1%. Neil Welsh, metal director at Britannia Global Markets, said: "This shift is expected to inject a certain level of certainty back into the copper market, allowing the market to refocus on the fundamentals rather than short-term trading based on news headlines." However, even as the market returns to fundamentals, the fundamentals of copper appear precarious. Although copper prices have been boosted recently by growing power demand, copper remains one of the most economically sensitive commodities, with its trends closely linked to the growth prospects of the US and China economies. Earlier this week, the Federal Reserve chose to keep interest rates unchanged. However, after Friday's employment data fell far below expectations, market expectations for a rate cut in September surged sharply. From a historical price trend perspective, the recent surge in copper prices has also caused some concern. Bloomberg Senior Commodity Strategist Mike McGlone pointed out that the recent trend of American copper is reminiscent of the oil market before the 2008 financial crisis. At that time, oil prices rose rapidly to a historical high of $147 due to economic distortions, but then plummeted to $32 as the housing bubble burst. Today, oil prices are still hovering around $68, only half of the previous high. According to this analogy, copper prices could also plummet significantly from the high of $5.8 per pound set on July 23rd. If it experiences a "halving from the peak" like oil did, copper prices could fall to around $3 per pound, which was the operating range for most of the 2010s until it broke through $4 in 2021. "It is very common for commodities to experience a sharp pullback after reaching a peak," McGlone said. "After breaking $5, why can't copper return to $3? In the past twenty years, the price of this metal has mostly fluctuated around $3."