The early implementation of copper tariffs will most directly eliminate the arbitrage opportunities previously driven by tariff expectations, with the corresponding trade flows coming to an end. The phased supply-demand tightness in the LME and domestic copper spot markets will gradually ease, and the accumulation pace of COMEX copper's inventory will terminate as goods arrive at ports in July.
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Recently, Trump suddenly announced tariffs on the copper industry, stating that the United States will impose a 50% tariff on imported copper, effective August 1, 2025. Upon the news release, COMEX copper prices surged to nearly $5.896 per pound, hitting a new all-time high again. Correspondingly, the US-London spread widened rapidly to over $3,100 per ton in a short period, equivalent to a 31.5% increase. Later, as market sentiment eased, the CL spread gradually pulled back to $2,500-$2,600 per ton, accounting for an increase of approximately 26%-27%.
Looking back at the copper market under the influence of tariff expectations this year, the US-London spread began to widen since the start of the year when Trump claimed he would impose additional tariffs on countries including Mexico and Canada. After Trump announced a 25% tariff on all imported steel and aluminum in March, expectations for copper tariffs strengthened, keeping the US-London spread above $1,000 per ton. This opened up arbitrage space in copper trade, with large quantities of copper spot flowing from non-US regions to the United States, altering traditional trade flows and leading to persistent regional structural contradictions in copper markets. Specifically, inventories in China and LME continued to decline, while COMEX inventories rose sharply.
As of the end of June, US visible copper inventories stood at approximately 210,000 tons, an increase of nearly 120,000 tons compared to early March. Non-US copper inventories were about 285,000 tons, a decrease of nearly 400,000 tons from early March. Considering that the second quarter coincided with China's peak consumption season, coupled with factors such as a sharp drop in copper prices and new energy rush installations stimulating domestic downstream demand, excluding the impact of consumption, China's net imports from January to May decreased by approximately 260,000 tons year-on-year, which is the direct impact of changes in overseas trade flows.
According to US customs data, US imports of refined copper from January to May this year reached approximately 680,000 tons, an increase of 380,000 tons year-on-year. Based on data on US copper imports arriving at ports, as of early July, approximately 780,000 tons of electrolytic copper had arrived in the US. In a normal year, the US imports about 700,000-900,000 tons of refined copper annually, and the current import volume is already equivalent to the US's full-year level in previous years, sufficient to meet annual demand.
Breaking it down, the growth in US copper imports became apparent after March, with the increments mainly coming from Chile (207,000 tons) and the Congo (61,000 tons), contributing approximately 54% and 16% respectively. From Chile's customs export data, Chile exported about 722,000 tons of refined copper from January to May, of which 354,000 tons went to the US (an increase of 190,000 tons year-on-year), while exports to China and South Korea were 123,000 tons and 33,000 tons respectively (a decrease of approximately 180,000 tons and 40,000 tons year-on-year). Thus, the opening of the arbitrage window has diverted more Chilean copper to the US, at the expense of some shares originally destined for Asia. According to China's customs data, China imported about 1.346 million tons of electrolytic copper from January to May, including 527,000 tons from the Democratic Republic of the Congo (a decrease of approximately 18,000 tons year-on-year). However, Congo's copper production increased by about 44,000 tons in the first half of the year, which roughly matches the growth in US imports. Therefore, before the tariff expectations were implemented, the arbitrage space in spot trade flows led to most circulable electrolytic copper in non-US regions flowing into the US.
Looking ahead, the early implementation of copper tariffs will most directly eliminate the previous arbitrage opportunities driven by tariff expectations, with corresponding trade flows ending. The phased supply-demand tightness in LME and domestic copper markets will gradually ease, and COMEX copper's inventory accumulation will terminate as goods arrive in July.
From the perspective of global visible inventories, inventories have decreased by about 300,000 tons since March. Considering China's peak consumption in the second quarter and historical average inventory drawdowns, this decline is relatively moderate. The low inventories in China and LME are largely due to the diversion of copper to the US. Thus, after the tariffs take effect, refined copper trade flows will gradually normalize. The high US tariffs will increase import costs, making it difficult for electrolytic copper to flow into the US unless there is significant domestic supply-demand tightness. Non-US markets will gradually shift to a looser balance, with goods flowing in as import windows open. This will end the persistent premium structure in SHFE and LME in the first half of the year, as well as the implied squeeze risk. Currently, the LME Back structure has quickly shifted to Contango this week, while the near-month premium of Shanghai copper's main contract has also collapsed, with the August-September contract spread falling from a high of 420 yuan/ton to -20 yuan/ton, and the September-October contract spread dropping to 50 yuan/ton, maintaining a slight near-month premium. Going forward, attention should be paid to changes in import profit margins and domestic consumption; if import windows open and domestic demand weakens, the inter-month spread may decline further. Additionally, the US has long-term contracts for about 500,000-600,000 tons of annual electrolytic copper imports. After the tariffs take effect, if these long-term contracts cannot be executed as scheduled due to spread issues, more electrolytic copper originally destined for the US will flood non-US markets.
Of course, there are still nearly half a month until August 1, with two potential risks. First, a delay in the tariff's effective date, though unlikely. If this occurs, the US's siphoning of non-US trade flows will continue, making it difficult for LME and domestic inventories to rebound significantly. Second, the possibility of US copper tariffs excluding specific countries. Based on the US import structure, approximately 70% of its annual refined copper imports come from Chile, 17% from Canada, 7% from Peru, and Africa's share has gradually risen to 4% in recent years. If the US exempts these countries, especially Chile, the impact of tariffs will be significantly weakened, with more Chilean copper flowing to the US to fill domestic gaps. If the US exempts Peru and Canada, the tariff impact will persist but be less severe than without exemptions. Peru and Canada produce a total of about 700,000 tons of electrolytic copper annually; in this scenario, copper trade flows will shift again, with most copper originally destined for other regions in these two countries flowing into the US.
