The US "Copper Rush": Suddenly Turned into a "Sprint Race"?

The "copper rush" in the US suddenly turned into a "sprint race" this week...

Since Trump first mentioned imposing tariffs on imported copper in January this year, the global copper market has been in turmoil. This week, as news emerged that the US government aims to impose copper tariffs within weeks—rather than the previously expected months—it has clearly brought new shocks to the market.

On Wednesday, the price of copper futures contracts on the New York Mercantile Exchange (Comex) surged to a record high, while the international benchmark LME copper futures hit the largest discount ever compared to the US market price.

The widening price spread since January means that, in theory, copper traders could reap huge profits by snapping up cheaper overseas spot copper and shipping it to the US before the tariffs take effect.According to Mercuria, about 500,000 mt of copper is currently heading to the US, with most of it already en route.

However, what many traders are now worried about is that if these cargo ships carrying copper arrive at US ports "slowly" after Trump's tariffs take effect, their "well-calculated" plans could instead lead to massive losses...

Given that Trump's auto tariffs were implemented on Wednesday, and his tariff stick is still being wielded in many areas, this undoubtedly further unsettles copper traders whose goods are still far from US ports.

Undoubtedly, the risk of the Trump administration accelerating the implementation of copper tariffs could further disrupt the copper market—people previously thought it would take months for the tariffs to take effect, allowing ample time to ship copper from Latin America, Africa, and even Asia to the US.

"This is a race against time," said Matt Schwab, head of investor solutions at US hedge fund Quantix Commodities LP, in an interview. "The question is whether the Trump administration will grant a grace period for metals that are already en route."

Could a surefire arbitrage trade turn into a loss?

According to people familiar with the transactions, the global scramble for copper has been intense in recent weeks, with many traders even willing to pay a premium of up to $500 per mt on top of LME prices to secure copper deliverable on Comex.

Typically, such premiums hover around $100—but with Comex copper prices recently exceeding LME copper futures by about $1,500 per mt, traders are willing to pay higher premiums to secure large quantities of deliverable copper.

Kostas Bintas, head of metals trading at the renowned Mercuria Energy Group, said last week that this is almost the most profitable arbitrage opportunity he has ever seen.

Admittedly, considering that shipping from Asia and Africa to the US takes months, the timing of tariff implementation has always been a major risk for such arbitrage trades. However, given that US President Donald Trump instructed the Commerce Department in February to investigate potential copper tariffs and submit a report within 270 days, people initially thought the tariffs would not take effect so quickly, giving them enough time to ship copper to the US before the tariffs kicked in.

But "human calculations" seem to pale in comparison to Trump's "brainstorms." According to media reports on Tuesday, the Commerce Department's investigation into copper appears to be becoming a formality, and the tariffs could actually be implemented months before the official investigation deadline.

Currently, analysts' consensus and Trump's own calls are to set the copper import tariff at 25%. Based on the latest LME copper trading price on Wednesday, this means the tariff per mt of copper would be around $2,500.

If the cargo is not delivered to the US in time, this tariff figure could completely erase the profit margin for traders looking to lock in the price spread between Comex and LME, and even lead to massive losses:

Since Trump first proposed copper tariffs in January, the price spread between Comex and LME has fluctuated between $250 and $1,700. Traders could also lose the premiums paid to secure the metal, as well as shipping and financing costs—potentially turning one of the most profitable trades in copper market history into an exceptionally painful memory.

What does this mean for international market prices?

It is worth noting that as Trump's copper tariffs may be implemented earlier than expected, analysts are now reassessing the amount of metal that will ultimately reach the US and its potential impact on international copper prices.

Traders and analysts previously bet that the global copper market could face a severe supply deficit as hundreds of thousands of mt of metal are shipped to the US. Geneva-based Mercuria stated that this trend could push LME copper futures to record highs.

However, if the tariffs are indeed implemented early, reducing the flow of metal to the US, the likelihood of a sustained supply-driven rally would diminish.

Michael Cuoco, head of metals and bulk materials hedge fund sales at StoneX Group Inc., said,"If the tariffs are implemented in weeks rather than months, this would support the view that the LME copper rally has ended."

Beyond the direct turmoil caused by the brewing tariffs on global trade flows, analysts are increasingly focusing on the impact that the rapid imposition of copper tariffs will have on manufacturers in the US and other countries.

Bart Melek, global head of commodity strategy at TD Securities, said in an interview that the tariffs could negatively impact global copper demand, as they would raise the price of copper-containing metal products in the US and also harm manufacturers.