Copper Trade Tensions Rekindled: Tariffs Squeeze Global Market Supply

Copper Market Sees Renewed Speculation and Tariff Threats

The global copper market is once again experiencing a surge in trade, as speculation about import tariffs revives a trade that has had a significant impact on the $300 billion-a-year market. The on-off threat of import tariffs from President Donald Trump has dominated the copper market over the past year, often driving prices on New York's Comex above global benchmarks.

In recent months, US copper imports had slowed after softer Comex prices made shipments unprofitable. However, a pick-up in the spread between Comex and the London Metal Exchange (LME) in the past few weeks has meant that traders are now shipping every spare ton to the US. This is according to several executives, who predict that imports could bounce back to historically elevated rates of 150,000 to 200,000 tons a month.

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Front-month Comex contracts have risen to more than $500 a ton above cash prices on the LME for the first time since last autumn. This outperformance is being driven by renewed investor enthusiasm for copper as well as speculation that the Trump administration will impose import tariffs on refined metal as part of its effort to protect US industry.

Trafigura, a leading industrial metals analysis firm, has withdrawn hundreds of millions of dollars of copper from LME warehouses, which was at least in part an attempt to capture premium prices on Comex. This move is the largest seen since 2013.

The renewed rush to ship to the US is adding to a bullish cocktail of factors that traders say could drive prices to fresh highs, after copper climbed to a record above $14,500 a ton in late-January. While the copper tariff trade is reviving, getting metal into the US is becoming harder. Shipping South American copper to major US ports is taking much longer than usual as disruptions tied to the Iran war ripple through global freight markets and intensify congestion at the Panama Canal.

Copper is already trading at historically elevated levels, reaching as high as $13,746 a ton in London on Wednesday, up about 43% in the past year. Enthusiasm about artificial intelligence has helped lift investor positioning on Comex to the most bullish since December 2020. And buyers in China, which had stepped back from the market when prices rallied earlier this year, have returned since the Chinese New Year holiday.

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Should Trump decide to impose tariffs on refined copper, the impact could be to squeeze supplies on the LME, traders said. That would be reinforced if the US follows through on the Commerce Department's recommendation last year that a tariff of 15% should be imposed from January 2027. This could potentially open a window in the second half of the year when there would be a huge incentive for traders to ship copper to the US.

The copper market outside of the US is in deficit, with inventories already starting to be drawn down in China. Nicholas Snowdon, chief metals economist at Mercuria Energy Group, said, "The focal point of that deficit should move to the LME. It's a matter of time."