Tariff "Uncertainty" Becomes Biggest Bullish Factor for Copper: Over 1 Million Tons of Copper Flow to the U.S., LME Copper Price Reaches Record High of $14,700

Copper prices have repeatedly hit record highs, but the true driver behind this rally is not a surge in demand, but rather a regional mismatch in global copper inventories: the expiration of the U.S. refined copper tariff review has left a substantial arbitrage spread between New York and London, continuously drawing freely available global copper into the United States, resulting in spot tightness on the London Metal Exchange (LME).

The U.S. Department of Commerce previously recommended imposing a 15% tariff on refined copper starting in 2027, rising to 30% by 2028. However, the Trump administration exempted refined copper last year and only imposed a 50% tariff on semi-finished products such as copper pipes, wires, and electrical components, while ordering the Commerce Department to re-examine the measure by the end of June this year. Now that the review period has expired and the White House remains silent, this policy “blank” is encouraging traders to continue shipping copper to the United States.

This “siphoning” effect is directly reflected at the LME: official Comex inventories have grown eightfold since the beginning of last year, exceeding 750,000 short tons (about 680,000 metric tons), with some estimates putting total U.S. copper stockpiles—including off-exchange inventories—over 1 million metric tons, roughly equivalent to the annual output of the world’s largest copper mine, Escondida. These metals are unlikely to flow back into the global market in the short term, resulting in continued tightening of available supply outside the United States.

Meanwhile, Chinese smelters, facing a shortage of copper concentrate and scrap, have massively increased imports of refined copper, boosting demand in parallel. With supply and demand resonating, LME copper prices broke through $14,700/ton during Tuesday’s session, hitting another all-time high. For investors, the copper price game has shifted from a macro demand narrative to a structural revaluation dominated by inventory imbalances and policy uncertainty.

Tariff “Blank” Maintains Arbitrage Window, Over 1 Million Tons of Copper Flow to U.S.

Expectations of tariffs on refined copper have driven New York copper prices above London’s benchmark since the first half of last year.

The premium of New York over London was once high enough to prompt commodity traders like Mercuria and Trafigura to compete in shipping copper to U.S. ports. The Trump administration last year put a 50% tariff on copper pipes, wires, and other semi-finished and electrical components, but exempted refined copper, only requiring the Commerce Department to review measures by the end of June.

Now that the deadline has passed with continued White House silence, the arbitrage window remains wide open. Even if tariffs do not materialize, some analysts and traders expect these inventories flowing into the U.S. to remain there for a long time. If tariffs are ultimately imposed, it could spark a final rush to ship before the tariffs take effect; if abandoned, traders may unwind positions accumulated over the past 18 months, reversing trade flows.

Project Vault Reinforces Stockpiling Expectations, LME Spot Premium Hits Highest Since 2021

Long-term stockpiling expectations are also backed by policy.

The Trump administration plans to create the $12 billion “Project Vault” critical minerals stockpile via public-private partnership, and copper is one of the 60 “critical” minerals identified by the U.S. as facing supply chain disruption risks. The overlap of strategic reserves and commercial arbitrage makes copper entering the U.S. even less likely to return elsewhere, further tightening the supply available to other markets.

LME warehouses have become the hardest hit by inventory losses.

LME copper inventories plunged 32% in one month to 205,000 tons, and the spot premium over the three-month future briefly surpassed $500/ton in mid-August, the highest level since the squeeze in 2021. Traders temporarily eased the tightness with large-scale deliveries, but a big withdrawal application at the end of August pushed freely available inventories back to extremely low levels.

China’s Refined Copper Imports Surge, Unresolved Mining Supply Constraints

The demand side is also shifting. As the world’s largest copper consumer, China has ramped up direct imports of refined copper this year amid smelter shortages of concentrate and scrap, further fueled by potential U.S. tariffs. With manufacturing entering its traditional busy season, China’s copper demand is expected to rise further.

Supply constraints are even more pronounced. From Chile to Indonesia, mine disruptions continue, and unless output recovers in the second half, global mine production could decline year-on-year for the first time since 2017; falling ore grades increase extraction costs and difficulty, and environmental reviews have also raised the cost of new projects.

According to S&P Global, it takes more than 15 years on average from discovery to production for a new mine. Societe Generale analysts believe U.S. trade policy and tariffs-driven arbitrage will continue to steer copper prices, with inflows into the U.S. persistently tightening physical supply in other regions.

In the long run, the energy transition and the construction of AI data centers offer strong support for copper demand, as copper is essential for solar energy, wind power, electric vehicles, the power grid, and data centers. As long as the tariff review for refined copper remains unresolved, the regional imbalance in global copper inventories will be difficult to reverse, and copper’s structural strength is set to continue.