Trump's plan to impose hefty tariffs on copper to impact copper prices, price spread between New York and London widens. What's next for the market? [SMM Commentary]

SMM News on July 9:

According to multiple media outlets, including CCTV, US President Trump stated at a cabinet meeting held at the White House on July 8 that a new 50% tariff would be imposed on all copper imported into the US, though the specific effective date of the new tariff was not disclosed. However, US Secretary of Commerce Lutnick also pointed out on the same day that the Department of Commerce had completed its investigation into copper imports, and Lutnick expected the new tariff "to be implemented possibly by the end of July or August 1." The announcement of this tariff policy had a significant impact on the global copper market. LME copper, SHFE copper, and COMEX copper, all important indicators of international copper prices, experienced fluctuations and adjustments. COMEX copper hit a new all-time high of $5.8955/lb during trading on July 8, but then entered a consolidation phase after reaching this peak. As of around 15:32 on July 9, COMEX copper was reported at $5.6135/lb, down 1.27%; LME copper was reported at $9,628/mt, down 1.66%; and SHFE copper was down 1.36%, reported at 78,400 yuan/mt.

》Click to view SMM Futures Data Dashboard

The price spread between COMEX copper and LME copper widened significantly

From the perspective of the price spread between COMEX copper and LME copper, based on the prices around 15:32 on July 9, the price spread between COMEX copper at $5.6135/lb and LME copper at $9,628/mt was $2,747.63, representing a significant increase compared to the previous spread of around $1,500.

COMEX copper inventories have risen to 220,000 short tons, and copper inventories in non-US regions have also increased

》Click to view SMM Metal Industry Chain Data Terminal

From the inventory data perspective:

According to SMM's copper inventory data from major regions across the country, as of July 9 (Wednesday), and as of Monday, July 7, SMM's copper inventory in major regions across the country increased by 11,100 mt from last Thursday to 142,900 mt; compared to the inventory changes from last Thursday, inventories in all regions increased. The total inventory was 255,100 mt lower than the 398,000 mt from the same period last year. Comparing 142,900 mt with the SMM copper inventory data of 126,100 mt from major regions across the country on June 3 (Monday), it increased by 16,800 mt, representing a growth rate of 13.32%.

From the perspective of changes in LME copper cathode inventory data, after LME copper inventories fell to a yearly low of 90,625 mt on June 30, LME copper inventories have recently shown a gradual upward trend. The latest inventory data for LME copper inventories as of July 9 was 107,125 mt, representing an increase of 16,500 mt compared to 90,625 mt, with a growth rate of 18.21%.

From the perspective of COMEX copper inventory data: COMEX copper inventories had risen to 221,788 short tons on July 8, representing an increase of 10,579 short tons compared to the COMEX copper inventory data of 211,209 short tons on June 30, with a growth rate of 5%.

Outlook

Macro Perspective:

Renewed concerns over tariff uncertainties have dampened market risk appetite, exerting downward pressure on copper prices. For the outlook, the key variables lie in whether there will be unexpected economic data or policy incentives at home and abroad: if a "tailwind" emerges at the macro level, it may offset the downward pressure on copper prices caused by tariffs; otherwise, under the continuous disturbance of tariff policies, copper prices are unlikely to show outstanding performance in the short term.

Fundamentals Side:

Supply Side: According to data released by the Central Bank of Chile on Monday, Chile exported copper worth $4.7 billion in June, the highest amount since December 2021, with the value increase exceeding the price increase. Although Chile has not yet released its copper production data for June, the outstanding performance of this export data has been interpreted by the market as an increase in Chile's copper production, and the new supply will limit the increase in copper prices in the short term.

Consumption and Inventory Side: Both domestic and imported copper arrivals are expected to increase this week, with total supply expected to rise WoW. In terms of consumption, it is anticipated that consumption will increase this week compared to last week after the pullback in copper prices. SMM predicts that copper will see an increase in both supply and demand this week, with copper inventories expected to decline again but continue to rise on a weekly basis. Meanwhile, there are already signs of an increase in domestic copper inventories and non-US copper inventories such as LME copper inventories, and the proposed timing of the US tariff hike may be earlier than market expectations, further increasing the probability of continued inventory increases in non-US regions. The supportive effect of low inventory levels on copper prices has thus been weakened, adding another layer of pressure to copper price trends.

Price Spread Impact:

It is noteworthy that the current price spread between COMEX copper and LME copper has widened significantly, and this price divergence phenomenon is becoming a key variable influencing global copper market capital flows and trade patterns. From the perspective of driving logic, the huge arbitrage space created by the short-term widening of the price spread is attracting traders to accelerate the transportation of copper resources from non-US regions to the US market - after all, before the tariff policy is implemented, seizing this time window to complete deliveries can earn excess returns between the price spread and freight costs, which has also led to a phased increase in US copper imports recently.

However, the sustainability of this arbitrage behavior is facing strong impacts from tariff policies. As market expectations for the implementation of a 50% copper tariff in the US continue to rise (especially with the implementation window approaching from late July to early August), traders have begun to adjust their transportation strategies: on the one hand, short-haul transportation orders that were placed in advance may be completed in bulk before the tariff takes effect, but new orders for long-haul transportation have significantly decreased, with widespread market concerns that US copper import costs will rise sharply after the tariff is implemented, and at that time, cross-market arbitrage space may be wiped out by policy barriers; on the other hand, copper resources originally planned to be shipped to the US are gradually being redirected to non-US regions such as Europe and Asia, which will directly alleviate the price support formed by previous supply tightness in non-US markets - for example, the upward momentum of LME copper and SHFE copper previously driven by regional supply tightness may weaken with the increase in resource inflows.

More notably, this shift in trade flows may further exacerbate the price spread divergence between New York and London: the COMEX copper market may face limited price gains due to demand digestion pressure following the short-term influx of resources and the anticipated contraction in imports after the implementation of tariffs. Meanwhile, although the LME market is receiving a resource replenishment, considering the limited global copper supply increment and the remaining resilience in non-US consumption, the downside room for price decline is relatively controllable. Consequently, the price spread between the two markets may enter a new round of expansion, thereby affecting global copper market hedging strategies and the raw material procurement layouts of smelters.

Institutional Voices

On July 9 (Wednesday), Goldman Sachs stated that copper export expectations to the US are expected to accelerate in the coming weeks, following President Trump's announcement of a 50% tariff on imported copper. Goldman Sachs reported that its estimate for the benchmark US copper import tariff has been raised from 25% to 50%. Goldman Sachs maintains its forecast for LME copper prices at $9,700 per mt in December 2025, but currently believes that the risk of prices breaking above $10,000 per mt in Q3 has decreased.

Citi Research analyst Tom Mulqueen stated on July 9 (Wednesday) that Trump's announcement on Tuesday of a 50% tariff on copper may drive LME copper prices below $9,000 per mt. US Commerce Secretary Lutnick indicated overnight that Trump will impose a 50% tariff on copper by August 1 or earlier. The clarity of the tariff implementation timetable is crucial for pricing in non-US markets, which will end the recent influx of spot copper from non-US regions to the US. From a 0-3 month outlook, this should drive copper prices in non-US regions back down to $8,800 per mt.

Jinyuan Futures stated: Trump's threat to impose a hefty 50% tariff on imported copper caused a sharp surge in US copper prices, attracting a large influx of cross-market arbitrage funds to enter the market and suppress LME copper prices. His simultaneous plan to impose new tariffs on pharmaceuticals, semiconductors, and several specific industries has sparked market concerns, intensifying global trade uncertainty. Fundamentals side, overseas concentrate supply remains tight, LME inventory has rebounded from low levels, and the sentiment of short squeezes has slightly cooled. The recent rise in US tariff expectations has exacerbated market volatility overseas, and it is expected that the volatility of US copper prices will increase, while LME copper prices will experience a short-term downward correction to confirm support levels.

Everbright Futures' research report points out: Macro side, the market is concerned about the re-emergence of trade tensions, with Trump threatening to impose a 50% tariff on copper. Fundamentals side, inventory buildup has occurred in LME, Comex, and domestic social inventory, with LME showing a marginal increase and US copper showing a marginal decline, alleviating market concerns about short squeezes amid low inventory levels. Last night, Trump threatened to impose a 50% tariff on US copper, triggering market volatility. US copper prices surged to their biggest gain in decades, while LME copper prices fell rapidly. This may imply that if the tariff is implemented, US copper and overseas copper will each bear part of the impact, though further observation is needed. However, if the tariff is implemented, it may also signal the end of the copper inventory migration story.

Recommended Reading:

"Understanding in One Article: Where Does the US Get Its Copper From? What Impacts Might the Tariffs Have?"

"Copper Prices Soar to New Highs! Trump Wields the Big Stick Again: Threatening to Impose Hefty Tariffs on Copper and Pharmaceuticals"

"COMEX Copper Futures Hit Record Highs Amid US Tariff Policy Disruptions"

"Chile, the World's Top Copper Producer, Monitors Latest Developments in US Tariff Policy"

"COMEX Copper Inventories Rise to 221,788 Short Tons on July 8"