Copper's tariff dislocation risks becoming structural split: Andy Home

U.S. imports of refined copper jumped by 80% year-on-year to 1.64 million metric tons in 2025. Traders shipped metal through a wide arbitrage window as the CME's U.S. price HGc1 traded at a large premium LMECMXCU1 over the international price traded on the London market CMCU3. The pace of arrivals has quickened again this year. Imports rose by 13% to 763,000 tons in the first five months, according to the World Bureau of Metal Statistics, which collates official customs figures. The tariff distortion on global copper flows is clear to see in the distribution of global exchange inventory. CME warehouses currently hold 58% of the world's visible copper stocks, a ratio that has been steadily rising ever since Trump ordered an investigation into copper imports in February 2025. The CME's share is likely to continue growing as ShFE stocks get cleared out and the fight for a slice of the shrinking copper stocks pie moves to the LME. ShFE stocks have plummeted from a March high of 433,458 tons to just 69,610 tons, reflecting a tight domestic market. Primary metal supply has dropped due to smelter maintenance and the scrap supply chain has been disrupted by a clampdown on circular invoicing. After drawing down Shanghai exchange stocks, Chinese buyers are clearly hungry for more. The Yangshan copper premium over the LME price SMM-CUYP-CN, a closely watched gauge of Chinese import demand, has soared from $59 per ton in June to a four-year high of $115, according to local data provider Shanghai Metal Market. The Shanghai futures curve is steeply backwardated. The one-year spread is the tightest it's been since December 2025. The scramble for metal not already heading to the United States has shifted to the London market. LME headline stocks have fallen steadily from a May peak of just over 400,000 tons to 262,000 tons. A flurry of cancellations, mostly at Asian locations, has left open inventory at six-month lows just above the 100,000-ton level. Another 118,000 tons of copper are sitting off warrant in LME warehouses, but 77% of this metal is in the United States waiting its chance to slip through the arbitrage window. The LME forward curve has been tightening. The benchmark cash-to-three-month period CMCU3 flipped into backwardation earlier this month. The cash premium is now $33 per ton. While the threat of tariffs keeps the U.S. copper price trading at a premium over London, the country is going to continue attracting metal. China is now competing with the U.S. tariff premium, $200 per ton on a spot basis, to replenish its own depleted stocks. The LME is squeezed between these two gravitational forces. The backwardation should attract more stocks, everything else being equal. But in this dislocated market, the cash premium will likely have to stay higher for longer to divert metal into LME warehouses. Low LME stocks and tight spreads could well become the new normal until such time as the U.S. administration lays out its tariff plan. The problem for the rest of the world is that it has no pressing reason to do so as long as its strategic reserve keeps accumulating. The copper market was expecting U.S. President Donald Trump to decide on whether to impose import tariffs on refined copper at the end of June. It's been waiting over a year for a final ruling and it's still waiting. The deadline for Commerce Secretary Howard Lutnick to make a recommendation to the president has come and gone with the White House yet to give away any clues to its thinking. There's a strategic incentive not to say anything. The threat of tariffs has generated a premium for U.S. delivery, attracting huge volumes of physical copper. The country has in the space of 18 months accumulated a significant stockpile of a metal that is critical to both green and technological revolutions. This, however, is a problem for everyone else, as is becoming clear from the rapid declines in London Metal Exchange (LME) and Shanghai Futures Exchange (ShFE) stocks. Moreover, the longer the tariff uncertainty reigns, the greater the risk of the current regional fracturing of the global copper market becoming a structural rift.

Copper's tariff dislocation risks becoming structural split: Andy Home

U.S. stockpile keeps growing

Shanghai shortage and London scramble

Structural rift risks becoming the new normal

Tariff uncertainty keeps pulling copper into the U.S.

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