Antofagasta earnings preview: navigating copper tariffs and investment cycle pressures

​​​US copper tariffs reshape market dynamics

​The landscape for copper producers shifted dramatically on 1 August, when the US government implemented a 50% tariff on semi-finished copper products. This policy change creates both challenges and opportunities for major producers like Antofagasta as they navigate the new trade environment.

​The tariff specifically targets semi-finished copper products while excluding raw copper materials such as ores, concentrates, and cathodes. This distinction is crucial for Antofagasta, as much of its export business focuses on these raw materials that remain unaffected by the new duties.

​However, the company has expressed concerns that the tariffs will raise costs for US buyers and potentially disrupt established supply chains. The policy aims to boost America's domestic copper processing industry, which has seen significant decline in recent decades.

​Initial market reactions saw copper prices spike before settling as traders digested the scope of the tariff exclusions.

​Antofagasta positioned to navigate tariff challenges

​Despite the tariff implementation, Antofagasta's business model provides some insulation from the most severe impacts. The company's focus on raw copper exports means its core products avoid the 50% duties imposed on processed materials.

​Antofagasta's CEO has acknowledged the challenge posed by increased costs for US buyers, while also highlighting potential long-term opportunities. The company's stalled Minnesota copper project could benefit from a strengthened US mining and processing industry over time.

​The tariff environment introduces additional complexity to pricing negotiations and supply chain management. US buyers may seek to renegotiate contract terms or explore alternative suppliers, creating potential volume pressures for Chilean producers.

​However, global copper supply remains tight due to supply-demand imbalances and strong demand driven by electrification trends. This fundamental backdrop should support pricing power for efficient producers like Antofagasta, even amid trade policy uncertainty.

​Strong operational delivery continues despite headwinds

​Antofagasta's half-year results, due on 14 August, are expected to demonstrate continued operational excellence despite the evolving trade environment. Deutsche Bank forecasts EBITDA of around $2.05 billion for the first half of 2025.

​The company delivered 315,000 tonnes of copper production in the first half, maintaining guidance for sequential output increases through the remaining quarters. This consistent production performance reflects the quality of Antofagasta's Chilean mining operations.

​Management has kept full-year production guidance unchanged, providing confidence in the company's ability to meet targets despite broader industry challenges including trade tensions. The operational resilience has been a key factor behind the stock's outperformance this year.

​Investment cycle pressures persist amid tariff uncertainty

​The company's substantial $2 billion investment in water infrastructure at Los Pelambres mine continues to reshape its financial profile, with negative free cash flow expected throughout 2025. This investment cycle pressure now coincides with trade policy uncertainty.

​Net debt is projected to reach around $2.2 billion at the half-year point, reflecting the funding requirements of ongoing capital programmes. The tariff environment could potentially impact cash flow generation if US demand patterns shift significantly.

​However, the long-term nature of infrastructure investments means these projects should deliver benefits regardless of short-term trade policy changes. The Los Pelambres water project positions the company for sustained production over many years.

​Deutsche Bank analysts expect a dividend of approximately 14 cents per share, based on the company's established 35% payout ratio. This demonstrates management's commitment to shareholder returns despite current investment pressures and trade uncertainties.

​Copper market fundamentals remain supportive

​Despite tariff-related volatility, underlying copper market dynamics continue to support producer margins. Major analysts forecast continued price strength through 2025, with some predicting prices above $10,000.00 per tonne by year-end.

​Global supply constraints persist due to limited new mine development and declining ore grades at existing operations. Meanwhile, demand from electrification trends, renewable energy infrastructure, and electric vehicle (EV) production continues growing.

​The US tariff policy, while creating short-term disruption, reflects recognition of copper's strategic importance for energy transition goals. This policy focus should support long-term demand even as trade flows potentially shift between regions.

​Antofagasta share price – technical analysis

​While the shares have gained steadily from the lows of April, recording higher highs and higher lows, they have now reached the £20.00 area which has marked the highs since last September. This has created an area of strong resistance, and could see the shares struggle here once again.

​A close above £21.00 would mark a bullish development, bolstering the current uptrend. Short-term weakness may find support at £18.00, or at the June low at £16.75.

​Antofagasta chart