Copper Rush in the US Amid Tariff Panic

Amid tariff panic, the US is witnessing a "copper rush" frenzy.

It is reported that the US is about to experience a large - scale copper freight wave. It is estimated that 100,000 - 150,000 tons of refined copper will arrive in the US in the next few weeks. If all of them arrive within the same month, it will exceed the historical record of 136,951 tons set in January 2022. Commodity traders such as Trafigura, Glencore, and Gunvor Group are redirecting a large amount of metals originally planned for Asia to the US.

Analysts believe that the global copper trade pattern is being reshaped. The rising premium in the US has led to price distortion, and China may face a supply shortage. All of this stems from the possible tariff policies of the government. This chaotic situation is supporting the rise of copper prices in the short term.

During the Asian session on Thursday, the price of LME copper futures reached the $10,000 mark, the highest since last October. So far this year, the price of US Comex copper futures has risen by more than 25%, while the LME price has risen by about 13% so far this year.

Currently, the price of US Comex copper futures is approaching the historical high set in May last year. The premium over LME copper futures has risen to more than $1,200 per ton, with a premium rate of 12%, approaching the historical high set in mid - February.

Tariff threats have triggered a "copper rush". Last month, the US president signed an administrative action plan, instructing the US Department of Commerce to start an investigation into the threat posed by copper imports to national security and propose methods to mitigate such threats. The order states that mitigation measures may include "potential tariffs, export controls, or incentives to increase domestic production".

The Department of Commerce has a maximum of 270 days to report to the president. This period provides an import window for importers before potential tariffs are implemented.

Goldman Sachs Group and Citigroup expect the US to impose a 25% import tariff on copper by the end of the year. However, even with tariffs, US copper buyers have no choice but to continue buying imported metals because the US consumes twice as much copper as it produces.

The US domestic consumption relies on copper imports. Chile is the country's largest supplier, accounting for 41%, followed by Canada, accounting for 27%.

Despite the increasing copper inventories, US buyers continue to seek more copper from countries such as Chile and Peru. Considering the comprehensive tariffs imposed by the US on its major trading partners, some metals from mines in Mexico and Canada may be redirected to Europe.

Goldman Sachs analysts expect that by the end of this year, all forms of copper shipped to the US will be affected by tariffs, which will make the price of US Comex much higher than other benchmark prices.

The premium is reshaping the copper trade pattern. Analysts believe that the premium has created a profitable environment for producers and traders, enabling them to take advantage of the price difference between the US and other markets. Citigroup analyst Tom Mulqueen pointed out that this may indicate a broader reshaping of the supply chain.

According to the research department of ING, tariff threats have led traders to transfer copper from global LME warehouses to the US to take advantage of arbitrage opportunities. Since the president won the election, CME copper inventories have been rising steadily. Most of the goods entering the US come from South America, but some also come from Asia. The inventories of the London Metal Exchange have decreased slightly.

Meanwhile, since the end of February, the cancellation volume of LME copper warrants has soared, with the largest cancellation volume in Asian inventories, followed by Europe. Orders for extracting metals from LME warehouses in Asia have soared to the highest level since August 2017.

If the demand grows faster than expected, the copper boom in the US may lead to a tight copper supply in other parts of the world. Goldman Sachs analysts expect that the global market will face a shortage of 180,000 tons this year.

ING analysis shows that in the short term, as the US investigation into copper imports continues and more metals enter the US before potential taxation, copper prices may continue to be supported. In the future, if tariffs are imposed, US copper prices will face further upward risks; however, if any potential tariffs are lower than expected, the price difference may decline.