Trump’s tariff threat sparks global race to get copper to the US

The world’s top commodity traders are rushing to ship copper to the US from as far afield as Asia as Donald Trump’s threat of import tariffs on the metal creates a huge opportunity for profit.

The gap between copper prices in the US and the rest of the world widened sharply after the president on Tuesday ordered the Commerce Department to examine potential levies on the metal. Prices on New York’s Comex surged as much as 4.9% to trade more than $1,000 a ton above the London Metal Exchange benchmark, which rose 1.2% to about $9,500 a ton.

Glencore Plc and Trafigura Group have been prominent among trading houses who’ve been moving to ship copper to the US market in recent weeks, according to people familiar with the matter. The bulk of their cargoes are coming from South America, but they’ve also made inquiries about shipping out copper from Asian warehouses tracked by the London Metal Exchange, some of the people said. Spokespeople for Glencore and Trafigura declined to comment.


The threat of tariffs has created a compelling opportunity for profit for traders, according to several people involved in the market: US copper prices have traded at a premium of as much as $1,300 a ton this month, compared to the cost of shipping copper to the US of $300 a ton or less. That’s compared to razor-thin trading margins usually made from buying, selling and shipping commodity-grade metal.

“Lots of people have been watching that arbitrage, but very few people have been brave enough to actually trade it,” said Alice Fox, associate director of commodities strategy at Macquarie Bank Ltd. The time it takes to transport copper to the US could mean traders could get stuck with tariffs before their metal is shipped, she said. “It’s perceived as a very high-risk trade, because there’s too many factors that could change.”

Still, while Trump’s earlier warnings about possible tariffs had sparked nervousness about whether traders would be able to get copper to the US in time, the section 232 investigation he has ordered is likely to take many months to complete. That opens a window during which traders can move metal to the US without paying tariffs and lock in profits of several hundred dollars a ton.

At the same time, it is pushing up costs for US copper buyers, and upending global trade flows in a way that could leave the rest of the world short of inventory if demand in top consumer China picks up. Requests to take copper out of LME warehouses in Asia have surged by more than 93,000 tons since Friday, fueling the biggest four-day drawdown of stock since 2013.

Normally, the LME’s Asian depots are a magnet for metal moving into and out of China, but the surge in US copper prices linked to Trump’s mooted tariffs is starting to draw metal away from the world’s top copper consumer.

The timing and magnitude of Trump’s proposed tariffs are highly uncertain. The government needs to determine whether imports have harmed domestic copper producers enough to threaten national security, and according to the terms of the order it may take nearly a year for the president to implement any duties.

On the other hand, a swift imposition of levies could wipe out profits for prospective importers. But for commodity traders operating on lean margins, the opportunity has become too big to pass up.

Arbitrage trading typically brings global metals prices swiftly back into lockstep. But the enduring premium for US contracts seen in recent weeks reflects a new era of uncertainty, as markets grapple with the Trump administration’s embrace of tariffs and the often turbulent circumstances surrounding their imposition.

Earlier this month, the nearby copper contract on Comex spiked to about $1,300 more than the equivalent LME price, translating to a premium of about 14%. The spread then narrowed to around $600 a ton, as traders sought to capitalize by buying cheaper LME contracts and simultaneously selling on Comex, before ballooning back out on the back of Trump’s announcement.

The moves in copper mirror what has been happening in other metals. Gold, silver and aluminium have all seen US prices surge relative to international benchmarks, creating arbitrage opportunities for traders.

American manufacturers, meanwhile, have been counting the cost. On average they’ve had to pay about 8% more for copper than their peers in the rest of the world since Trump first first proposed tariffs in late January.

One obstacle to imports is that only a handful of copper producers are approved to deliver on Comex, and crucially the list excludes smelters in top supplier China. Those firms have also been dissuaded from selling to America by Trump’s blanket 10% tariff on Chinese goods. But they may not miss out entirely.

At least one Chinese copper smelter has started shipping refined copper to LME warehouses in Asia, after the recent spike in orders from the LME helped drive prices on the exchange above equivalent domestic contracts, according to people familiar with the matter.

The smelters were already making preparations to ship metal out as the arbitrage opportunity opened up this week. But Trump’s order has given smelters confidence that the export window will remain open for longer, and they’re now moving to deliver metal on to the LME in greater volumes, the people said.

The profit margins of around $80 to $110 a ton are much smaller than traders can make on Comex but the incentives are encouraging for Chinese smelters who are struggling with low processing fees. They’re enticing enough to suggest that Chinese copper could soon be arriving LME sheds in large volumes to replace metal bound for the US.