Adds info on collapse in LME arbitrage and potential market impact going forward
US copper futures plummeted on Wednesday after the White House exempted copper cathodes, ores, scrap and other inputs from upcoming 50pc tariffs while also announcing scrap export restrictions.
The executive order places 50pc Section 232 tariffs on semi-finished copper products — pipes, wires, rods, sheets and tubes — and copper-intensive derivative products such as pipe fittings, cables, connectors and electrical components, effective 1 August. Cathodes, anodes, mattes, ores, scrap and other raw material forms are exempt from any import duties.
The clarification resulted in a sharp drop in US copper futures that had surged this year because of expectations of broader tariffs. The CME next most active contract plummeted by more than $1/lb in aftermarket trading after settling at $5.59/lb and setting three record highs in recent weeks, including an all-time high of $5.82/lb on 8 July.
The September contract most recently traded at $4.38/lb at 10:06 eastern standard time on 31 July, down by $5.70/lb from immediately prior to the tariff announcement.
The collapse in the Comex copper price almost completely wiped out its premium to the London Metal Exchange (LME) price. The premium fell to just $18.18/t today from $2,716.83/t on 30 July, with the LME official three-month price down by 0.84pc on the day, at $9,655/t.
US market participants are taking stock and will require time to adjust to the new trading environment after more than seven months of preparations for heavy tariffs on copper cathode imports, during which global flows have increasingly been directed at the US.
The US imported 673,000 metric tonnes (t) of copper cathodes in January-May, according to Department of Commerce data — up from 293,000t a year earlier and already at 75pc of total 2024 receipts. Market participants surveyed by Argus expect that imports will exceed the annual requirement of around 800,000t when June's numbers are posted.
This surge of imports has sharply reduced refined copper availability for China, the rest of Asia and Europe — driving up premiums there.
As the US has no need for a large copper stockpile, given cathode and scrap tariff exemptions, some of that metal is likely to move back onto the global market in the coming months, which could pressure LME copper prices. But any such outflow might take time, as participants try to gauge whether the latest tariff decision is final and its impact the US market.
The new tariff will apply to copper content of a product, while the non-copper content remains subject to reciprocal tariffs or other duties, which will not be cumulative, according to the executive order. If a product is subject to 25pc auto tariffs, the auto tariff applies and not Section 232 copper tariffs.
The order authorised the commerce secretary to require 25pc of high-quality copper scrap produced in the US to be sold domestically. The Commerce Department also recommended requiring export licences for high-quality copper scrap — to "level the playing field" for US copper companies.
