In late February’25, President Donald Trump ordered a probe to potentially tariff copper imports. Since then Copper has witnessed the greatest arbitrage trade in recent decades. For the next 5 months, copper traders were at the forefront of a trend in which huge quantities of copper were being brought to the US, where a widening price gap with the international benchmark has created a lucrative arbitrage opportunity. Copper prices at Comex rose sharply against copper prices at LME in the last 5 months. If a trader had done the above arbitrage since Feb, they will have been sitting on almost 50% profits since Feb’25. On 11th July, he announced 50% tariffs on copper w.e.f from 1st August. Implementation from 1st Aug should abruptly close the window for further significant US-bound copper shipments (possibly for the rest of 2025). We now expect a pullback in ex-US pricing to $8,800/t on a 0-3mth view. We also expect the COMEX-LME arb to heavily discount a 50% rate given the significant US inventory build in recent months and the likelihood that key copper exporters to the US will be able to negotiate eventual partial exemptions at a lower tariff rate. We should see the reverse play out as US import demand collapses (with US inventory draws displacing net import requirements) which should relieve ex-US physical market tightness. This should be bearish for LME spreads, LME flat price, and bullish for COMEX spreads in the coming months. We believe that Chile, Canada and Mexico might eventually secure a lower 25% rate as key partners and US copper import sources and because of the excess US copper imports through 1H’25 (which we estimate totalled 400kt), we don’t think 50% arb will be priced in right now. LME copper is still the cheapest across the 3 major exchanges and for Chinese manufacturers who export most of their goods, it remains a decent source of material. Hence for above reasons we expect LME copper prices to outperform Comex copper prices. This should result in the arbitrage opportunity getting normalised at lower historical levels.
