Trump Tariffs Drive Inter-Market Arbitrage; Tight Raw Material Supply Causes Divergence in Copper Rod Export Market [SMM Analysis]

       With Trump signing an executive order to initiate the 232 investigation on copper, market expectations for future copper tariffs have been rising. This potential tariff threat has already driven up COMEX copper prices, pushing US copper prices and the price spread between COMEX and LME to a stage high. This not only boosted global copper prices but also altered the recent flow of copper cathode. Against this backdrop, domestic copper cathode rod export quotations have also been affected. Below is a detailed analysis:

       With Trump signing an executive order to initiate the 232 investigation on copper, market expectations for future copper tariffs have been rising. This potential tariff threat has already driven up COMEX copper prices, pushing US copper prices and the price spread between COMEX and LME to a stage high. This not only boosted global copper prices but also altered the recent flow of copper cathode. Under this background, the export window has remained open, import profit/loss has declined, and more foreign trade copper cathode has flowed to the US market. Meanwhile, imported supply in the domestic market has tightened, and raw material prices have been rising. As a result, domestic copper cathode rod export quotations have shown divergence.

       According to SMM statistics, the latest export processing fee quotations (FOB) for copper cathode rods have risen overall. As of March 15, the export processing fee (FOB) for 8mm copper cathode rods recorded a minimum of $200/mt, a maximum of $245/mt, and an average of $222.5/mt, up $7.5/mt MoM. For 2.6mm copper cathode rods, the export processing fee (FOB) recorded a minimum of $235/mt, a maximum of $285/mt, and an average of $260/mt, up $12.5/mt MoM.

       As shown in the chart above, the average center of export processing fee quotations has risen, mainly due to an upward adjustment in high prices, while low prices have remained stable during their gradual decline. The market has shown significant divergence. The primary reason for this divergence is that, in the process of shifting to processing trade to capture market share, some export orders in the market still adopt a low-price strategy to offer concessions. On the other hand, with the overall cost of processing trade rising and import raw material premiums and discounts also increasing under the current market conditions, some enterprises have followed the market trend to raise processing fees to cope with higher costs. The copper cathode rod export market is showing increasing divergence.

       It is worth noting that as copper cathode continues to be siphoned off to the US and the export window remains open, domestic imported copper may continue to face shortages. Copper cathode rod export enterprises indicate that processing fees may continue to rise in line with imported copper premiums and discounts. However, with cut-throat competition in processing fees becoming more apparent, the copper rod export market may continue to develop divergently.

       SMM will continue to monitor the copper rod export market and overseas market conditions for you.