FCX Jumps As Trump Tariffs Eyed For Copper, Though Warily

Freeport-McMoRan led a group of copper stocks higher on Wednesday morning after President Donald Trump signed an executive order initiating an investigation of copper imports that could result in tariffs. Yet Trump is taking a much more deliberate approach than he did in broadly applying 25% tariffs on all steel and aluminum imports.

Copper futures prices jumped more than 3% on Wednesday, possibly in reaction to Trump's executive order. However, it's not yet clear whether the Trump administration is convinced that copper tariffs make sense. No quick action is expected, and Trump hasn't suggested what level of tariff would apply, if any.

Trump Tariffs: Copper Executive Order

Trump's executive order calls for the Commerce Secretary Howard Lutnick to submit a report within 270 days on the advisability of tariffs, export controls or other incentives to increase domestic production.

The investigation of copper imports is broad-based, covering raw mined copper, copper concentrates, refined copper, copper alloys and scrap.

The order notes that the U.S. "has ample copper reserves, yet our smelting and refining capacity lags significantly behind global competitors."

Copper Tariffs: 'Primarily Inflationary'

Benchmark Minerals wrote on Feb. 3 that the U.S. has a trade surplus in copper ore, concentrates and scrap, with 900 kilotons exported mainly to Mexico and China.

"If these raw materials were to (be) converted into refined copper domestically, they would offset the country's refined copper imports," Benchmark Minerals analysts wrote.

However, the near-term impact of tariffs "is likely to be primarily inflationary," they wrote. That's because even if Trump eliminates hurdles to permitting mine and smelter projects in the U.S., "it still takes around two years to construct smelters and four years in the case of mines."

The Benchmark Minerals team added that copper pricing has built in hopes "that Chinese authorities will unleash a major fiscal stimulus package at the Two Sessions meeting" starting March 5.

FCX Stock

Freeport-McMoRan jumped 5.1% to 38.65 in early Wednesday stock market action. The move, if it holds at the open, would carry FCX stock back to its 50-day moving average. But look for a move above 40.85 to break the downtrend that began in late September.

Among other copper plays, Southern Copper rose 2.6% and Teck Resources 2.8%.

Freeport has a 21-day average true range of 3.29%. Southern Copper weighs in at 3.34%. Teck Resources is 3.14%.

The average true range is a metric available on IBD's MarketSurge charting tool. It gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.

In the current, unpredictable market, IBD suggests stocks with ATRs of 3 or below.

Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.