US Copper Tariff Threat Spurs Global Trading Surge

Top commodity traders are seizing a significant profit opportunity by shipping copper to the US from locations as far as Asia, driven by President Donald Trump’s potential import tariffs on the metal.

On February 24, 2025, the gap between US copper prices and those on the global market widened sharply after Trump ordered the Commerce Department to examine possible tariffs.

On February 25, New York’s Comex saw prices surge by as much as 4.9%, reaching more than $1,000 per ton above the London Metal Exchange (LME) benchmark, which rose 1.2% to around $9,500 per ton.

Glencore Plc and Trafigura Group have been at the forefront of shipping copper to the US in recent weeks, according to sources familiar with the matter.

While the majority of their shipments are coming from South America, they’ve also explored sending copper from Asian warehouses tracked by the LME. Spokespeople for both companies declined to comment.

This tariff threat has created a compelling arbitrage opportunity. US copper prices have been trading at a premium of up to $1,300 per ton compared to the cost of shipping copper to the US, which has been around $300 per ton or less. This represents a stark contrast to the thin profit margins typically seen in the global commodity trading market.

“Many traders have been eyeing this arbitrage, but few have been bold enough to engage in it,” said Alice Fox, Associate Director of Commodities Strategy at Macquarie Bank. “The time it takes to ship copper to the US introduces significant risks, as traders could find themselves caught by tariffs before their shipments arrive.”

However, the Section 232 investigation ordered by Trump is expected to take several months, which leaves a window for traders to move metal to the US without incurring tariffs, locking in profits of several hundred dollars per ton in the meantime.

This has caused a shift in global trade flows, pushing up costs for US copper buyers while potentially leaving the rest of the world with limited copper supplies if demand from China increases.

Requests for copper from LME warehouses in Asia have surged by more than 93,000 tons since Friday, marking the largest four-day drawdown since 2013.

While LME Asian depots have traditionally been a source of copper moving into and out of China, the increase in US copper prices linked to Trump’s tariff threat is starting to draw metal away from the world’s largest copper consumer.

The timing and extent of Trump’s proposed tariffs remain uncertain. The government must determine if imports have harmed domestic copper producers to the point of threatening national security, and according to the terms of the order, it could take nearly a year for any tariffs to be implemented.

Citigroup analysts predict that a 25% levy on US copper imports could be introduced by the fourth quarter of 2025, adding that the recent announcement of the Section 232 investigation should boost market confidence in the imposition of duties.

A swift imposition of tariffs could potentially wipe out profits for traders, but for those operating on thin margins, the opportunity has become too great to ignore.

Arbitrage trading typically aligns global metal prices quickly, but the persistent premium for US copper contracts signals a new era of uncertainty. Markets are grappling with the Trump administration’s approach to tariffs, and the volatility surrounding their potential implementation.

The rise in US copper prices mirrors similar movements in other metals. Gold, silver, and aluminum have also seen price hikes in the US relative to international benchmarks, providing additional arbitrage opportunities.

American manufacturers, however, are feeling the impact, as they’ve been paying an average of 8% more for copper than their global counterparts since Trump first proposed the tariffs in late January.

One challenge for copper imports is that only a few copper producers are approved to deliver copper to Comex, with Chinese smelters excluded from the list.

The 10% tariff on Chinese goods has further discouraged Chinese suppliers from selling to the US. Nonetheless, Chinese smelters are still finding ways to participate in the trade.

At least one Chinese copper smelter has started shipping refined copper to LME warehouses in Asia after the surge in orders from the LME helped drive prices above domestic contract levels.

The recent spike in prices has boosted smelters’ confidence that the export window will remain open for a longer period, prompting them to increase deliveries to LME warehouses.

Although the profit margins from LME shipments are much smaller than those from Comex, the incentives are sufficient to encourage Chinese smelters struggling with low processing fees. As a result, Chinese copper could soon replace metal originally destined for the US in LME warehouses.