London Metal Exchange (LME) copper prices have fallen after US president Donald Trump announced on Tuesday that he will impose a 50pc tariff on copper imports.
In the wake of the announcement, the market anticipates that the duty will halt the flow of metal into the US and redirect it back towards other global consumers.
The cash copper price on the LMEselect electronic trading platform fell by 1.75pc to $9,579.50/t at 12:06 BST today.
This was a stark contrast to movement on the US Comex exchange, where the next-month copper price soared by more than 13pc to $5.645/lb on Tuesday before falling back slightly to $5.502/lb in later trading. The jump drove the arbitrage between the Comex spot price and the LME cash price to a new record high of more than $2,500/t.
Clarity on term price movement and trade flow was clouded by the lack of detail on the US tariffs. Trump's announcement was an unscheduled comment before a cabinet meeting, followed by a comment from US Secretary of Commerce Howard Lutnick that the tariffs are likely to be in place by the end of July.
Even this short a window is likely to encourage one last spurt of buying from US consumers and traders looking to build tariff-free stockpiles before the duty is in place. This is likely to keep Comex prices and the arbitrage to LME high in the near term, but Comex prices might drop off sharply as soon as participants see that tariffs for new deliveries become too risky.
Once that threshold is crossed, copper shipments to the US are likely to fall sharply and US copper consumers will start to work through the vast tariff-free inventory that has built up in the country over the past six months.
US imports of refined copper under HS code 7403 have increased by 126.72pc this year to 680,727t, according to customs data. Of that total, 422,603t was delivered across April and May, which represented more than half of the total refined copper imports for the whole of 2024.
Data from vessel tracking platform Kpler indicate similar volumes of copper cathode imports in June as in April and May, which could mean that at least another 200,000t of copper has already made landfall in the US.
With this stockpile to work through, US consumers will not be actively looking to import significant volumes subject to a 50pc tariff in the near term, which means the shift in global copper trade flow this year might reverse rapidly.
Comex warehouse copper stocks rose by 138pc from the start of this year to 221,788t as of Tuesday, while LME warehouse stocks dropped by 61pc over the same period to 107,125t today. The trade flow shift has been centred on all Comex-deliverable copper brands, led by Chilean copper but also including European metal as well, leaving European and Chinese buyers to scramble for alternative supplies from the Democratic Republic of Congo in particular.
Chile is the largest supplier of copper to the US, accounting for more than 60pc of US refined imports this year. If US imports slow down as a result of the tariffs, Chilean copper will flow back towards China and Europe.
Greater availability will pressure LME prices and regional premiums in those ex-US markets, which have risen sharply this year on tighter supply. The Argus assessment for the delivered Germany grade-A copper cathode premium to the LME price has risen by 56pc since February to a record high of $270-290/t as of Tuesday, while the cif Shanghai grade-A cathode premium to the LME price has risen by 122pc over the same period to $80-120/t.
"It is difficult to know what will happen but Comex prices will go up and LME will go down," a major copper producer told Argus. "I don't see any short-term impacts in Europe but if the tariff is confirmed, then more copper will flow to Europe and Asia, decreasing physical premiums."
