The uncertainty surrounding U.S. President Donald Trump’s tariffs has created a booming environment for physical copper traders. The potential imposition of tariffs on copper imports has presented an extraordinary opportunity for those involved in the global movement of this metal. As a result, the copper contract on the CME is trading at a premium compared to the London Metal Exchange (LME) price, facilitating significant import arbitrage possibilities. Traders are hastily shipping physical copper to the U.S. to avoid impending tariff deadlines, affecting trading dynamics worldwide.
Copper traders have been attempting to price in the expected tariffs since the order for an investigation into imports was announced under national security grounds. The price disparity between CME and LME has shown volatility that reflects the erratic statements from the White House. For instance, a recent mention by Trump about imposing a 25 percent tariff on copper caught the market off guard and caused the CME premium to momentarily spike over $1,000 per metric ton, though it later corrected as the perception of Trump’s comments shifted. With CME premiums remaining around $800 per ton, trading in physical copper to the U.S. is already lucrative.
Those players in the market are focused on acquiring stock and clearing shipments through customs before any new duties are enacted. Recently, the LME has also seen significant turnover, with substantial amounts of copper being cancelled for physical load-out, indicating a tightening in availability as material is shifted towards the U.S.
Conversely, the investment community remains hesitant. Fund positioning in the CME copper contract is equally split between bullish and bearish stances, resulting in a cautious net long position. Investor sentiment is impacted by the wider economic climate, particularly as rising tariffs and tensions with trading partners pose a risk of recession.
While fund managers tread carefully, physical copper traders are capitalizing on the current situation, swiftly maneuvering to make profits amidst the prevailing uncertainty.