[SMM Analysis]Trump Tariffs Drive Cross-Market Arbitrage Copper Rod Export Market Diverges Amid Tight Raw Material Supply

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

With Trump signing the executive order to initiate the Section 232 investigation on copper, market expectations for future copper tariffs have been rising. Meanwhile, this potential tariff threat has also driven up COMEX copper prices, pushing US copper prices and the price spread between COMEX and LME to a periodic high. This not only boosted global copper prices but also led to a recent shift in the flow of copper cathode. Against this backdrop, the export window remains open, import profit/loss has declined, and more foreign-trade copper cathode is flowing to the US market. In the domestic market, imported supplies have tightened, and raw material prices have been rising. Under this influence, domestic copper cathode rod export quotations have shown divergence.

According to SMM statistics, the latest FOB export processing fees for copper cathode rods have generally increased. As of March 15, the FOB export processing fee 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. The FOB export processing fee for 2.6mm copper cathode rods 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 quoted center of export processing fees has risen, primarily due to an increase in high-end prices, while low-end prices have remained stable during their gradual decline, leading to a clear market divergence. The main reason for this divergence lies in the shift to processing trade to capture market share. Some export orders in the market still adopt low-price concessions, while 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 by raising processing fees to cope with the increased costs. The export market for copper cathode rods is showing an increasingly divergent trend.

It is worth noting that, with copper cathode continuously being siphoned to the US and the opening of the export window, the domestic supply of imported copper may remain tight. Export enterprises of copper cathode rods indicated that they might continue to raise processing fees in line with the increase in premiums and discounts of imported copper. However, under the increasingly evident cut-throat competition in processing fees, the export market for copper rods may continue to develop in a differentiated manner.
SMM will continue to monitor the export trends of copper rods and the overseas market conditions for you.