Imminent copper import tariffs and a broad arbitrage between the Chicago Mercantile Exchange (CME) and London Metal Exchange (LME) caused buyers to stock up on copper cathodes following President Donald Trump's order for a 232 copper probe ahead of the expected implementation of the 50pc tariff on 1 August.
Trump on 8 July said that he would impose a 50pc section 232 tariff on imports of all forms of copper, including raw mined copper, copper concentrate, refined copper, copper alloys, scrap and derivative products. The US imports about 50pc of the refined copper it consumes and does not produce enough copper cathodes to meet demand.
In response, CME copper jumped by 66¢/lb on 8 July, setting a daily record and a then-record settlement high at $5.69/lb. Copper on the CME has set three new record highs since the announcement of the tariffs, setting an all-time high at $5.82/lb on 24 July.
The US imported 673,000 metric tonnes (t) of copper cathodes from January-May 2025, according to data from the US Department of Commerce. That is 130pc higher than the 293,000t imported in the same period of 2024 and 75pc of the total that shipped to the US for all of 2024. Market participants surveyed by Argus anticipate that the US will exceed the country's annual import requirement of around 800,000t when June's numbers are posted, keeping downward pressure on cathode premiums for the US in the near term.
Tariffs widen arbitrage
A wide arbitrage between the CME and LME, driven by tariff concerns, has also drawn cathodes to the US, draining inventories in other parts of the world with sellers looking to profit off the higher CME price.
The arbitrage averaged 47¢/lb from the announcement of the section 232 probe in February until the 8 July statement of a 50pc tariff. The average spread rose to $1.25/lb between 9-24 July, well above the 12¢/lb average in July 2024.
An initial uptick in shipments began after Trump on 25 February initially called for the section 232 national security probe into potential new tariffs on copper imports.
Copper cathodes started flowing into US ports by mid-March, and CME warehouse totals have risen for 85 consecutive days to 224,854t as of 24 July, marking the highest total since 22 May 2018. The total is 1,861pc above the 11,465t in CME warehouses a year earlier, while inventories on the LME and Shanghai Futures Exchange (SHFE) declined.
Still, flows of non-registered cathodes that cannot be stored in a CME warehouse have slowed significantly. This material cannot be delivered to the exchange and requires a physical sale to close the arbitrage, but US spot market demand is not large enough to absorb the volumes. Consumers are also more aware of the arbitrage and are demanding discounts on non-registered units that have no alternative buyers, reducing the profitability of those imports.
Flows of CME registered brands of cathodes have continued to the US but are expected to slow because of the rising cost to import after the implementation of the 50pc copper tariff.
