(The opinions expressed here are those of the author, a columnist for Reuters)
LONDON, Sept 9 (Reuters) – Aluminium, steel and copper have all been hit with steep U.S. import tariffs this year, upending physical supply chains and fracturing global pricing.
Which metal is next for the tariff treatment?
There is no shortage of potential targets. The United States Geological Survey’s (USGS) latest iteration of its critical minerals list now includes 54 elements deemed essential for U.S. economic and national security.
All come under the scope of President Donald Trump’s Section 232 investigation into U.S. critical minerals import dependency. The investigation was launched in April and the final report and any potential tariffs are due in October.
The USGS list is sprinkled with obscure components of the periodic table, such as rare earth elements dysprosium and praseodymium. But it also includes globally traded industrial inputs such as zinc and platinum.
And now also lead and silver.
The USGS recommends both for inclusion, along with potash, silicon, rhenium and copper.
The United States is a net exporter of copper ore and concentrates, but the USGS highlights the country’s import dependency for refined metal as a reason for inclusion.
The Trump administration backed off from immediate tariffs on refined copper, but confirmation of the metal’s new national security designation would increase the likelihood of a threatened phase-in from 2027.
Silver, currently on a speculative price surge, is proposed for inclusion because of a scenario in which Mexico stops exporting to the United States, though that eventuality is described as a high-impact low probability event.
Rhenium and lead are both borderline, but the USGS warns that its risk assessments fluctuate as production and trade flows change.
To prove the point it has dropped tellurium and arsenic from the list.
Rio Tinto started recovering tellurium from its Utah copper smelter in 2022, leading to a decrease in U.S. imports. Arsenic’s removal reflects Peru’s move past China as the world’s largest producer.
The USGS has evolved its methodology to include the economic impact of potential supply disruptions to flows of critical minerals to the United States.
It has assessed the effects of more than 1,200 disruption scenarios for 84 minerals on 402 individual industries.
Minerals-based industries contribute more than $4 trillion to the U.S. economy and, to quote the USGS, “the loss of even one can ripple through entire industries, from semiconductors to defense systems, undermining production capacity, technology leadership and American jobs”.
Which makes samarium the most critical of all critical minerals owing to its importance in manufacturing guided missiles, space vehicles and search and navigation instruments.
Other rare earth elements, such as lutetium and terbium, make it into the top 10 along with semiconductor chip materials gallium and germanium as well as tungsten.
All of them are subject to some form of Chinese export restriction as Beijing leverages its grip on global supplies in response to U.S. restrictions on advanced computer chip sales to China.
The sheer number of potential metallic targets has inhibited individual markets from pricing in the probability of U.S. tariffs.
The mere threat of refined copper tariffs, subsequently deferred, was enough to trigger a mass relocation of metal to the United States.
The same has not yet happened for other industrial metals on the USGS critical minerals list, such as nickel, tin, zinc and, if confirmed, lead.
Nor do hybrid industrial investment metals such as platinum, palladium and silver seem prepared for tariff turbulence.
Palladium and silver are under-pricing tariff risk, Citi analysts say. Based on exchange-for-physical transactions, the U.S. premium for both metals is only 2-3% relative to non-U.S. pricing, which is very low considering the 50% tariffs applied to steel, aluminium and copper products.
The U.S. Commerce Department has also launched an investigation into potential Russian dumping of unwrought palladium, putting it high on the potential trade hit list.
The action against Russian palladium underlines the double nature of the critical minerals threat to the United States and other Western countries.
Dominant producer countries can both restrict supply or flood Western markets with too much supply to crush competitors.
The Trump administration must walk a fine line between using tariffs as a tool for increasing domestic production and potentially limiting already constrained availability.
Each individual metal on the lengthening USGS list of critical minerals has its own unique dynamics in terms of import dependency, alternative suppliers and domestic production potential.
Copper has come in for a more nuanced approach than aluminium or steel, where blanket 50% tariffs capture all countries and, after last month’s inclusion of 407 category codes, the whole length of the product chain down to household furniture.
The broad spectrum of minerals now classified as critical argues for an equally tailor-made approach to determining solutions.
Trump, of course, may disagree.
Either way, global metal markets are in for more tariff turbulence, whether they’re pricing it or not.
The opinions expressed here are those of the author, a columnist for Reuters.
(Editing by David Goodman)
