Navigating a Volatile Copper Market
Morgan Stanley made waves in the mining sector on July 15, 2025, by revising its ratings for copper mining stocks, citing macroeconomic uncertainty, stretched valuations, and commodity-specific risks. The firm noted that copper equities under its coverage have outperformed the London Metal Exchange (LME) copper price by 28 percentage points since April 8, but the “risk-reward is less compelling” as copper prices are expected to consolidate.
The bank downgraded Southern Copper Corporation (NYSE: SCCO) from an “equal weight” to an “underweight” rating, setting a $99.00 price target. Analysts highlighted that Southern Copper’s exposure to COMEX copper prices, which has driven its performance, will decline in 2026, potentially reducing its pricing advantage compared to peers, especially since the company does not mine copper in the U.S. Despite Southern Copper’s strong Q1 2025 performance—reporting $1.19 earnings per share (beating estimates of $1.10) and $3.12 billion in revenue (surpassing $2.94 billion)—Morgan Stanley sees limited near-term catalysts.
Conversely, Morgan Stanley upgraded Grupo Mexico to an “overweight” rating, calling it “the cheapest way to play copper” in its coverage universe, bolstered by reduced regulatory uncertainty in Mexico. The firm also sees “some upside” for Freeport-McMoRan (NYSE: FCX) due to its exposure to COMEX copper and gold, though it cautioned about a lack of immediate positive catalysts.
Copper Market Dynamics and Trump’s Tariff Impact
The copper market has been roiled by President Trump’s announcement of a 50% tariff on copper imports, which sent COMEX copper prices to record highs last week. Morgan Stanley flagged Freeport-McMoRan and Southern Copper as potential beneficiaries due to their COMEX-linked contracts, but analysts warn that the tariff could raise costs for U.S. manufacturers, potentially fueling inflation or reducing investment if companies absorb the costs. The Aerospace Industries Association noted that shifting to domestic copper suppliers could take up to a decade, complicating Trump’s push for a manufacturing renaissance.
Elsewhere, Canadian mining giant Teck Resources (TSX: TECK.B) remains undervalued despite copper’s surge, with Morgan Stanley estimating a 10% copper price rise could boost Teck’s EPS by 22%. Teck’s Q1 2025 revenue reached C$2.3 billion, up 41.4% year-over-year, highlighting its operational strength.
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