Top commodity trading houses are scrambling to ship copper to the U.S. from across the globe, capitalizing on a widening price gap spurred by President Donald Trump’s threat of import tariffs. The potential for high profits has drawn attention from industry giants like Glencore Plc and Trafigura Group, who are swiftly moving to seize opportunities despite the risks.
Following Trump’s directive on Tuesday for the U.S. Commerce Department to assess potential tariffs, copper prices on New York’s Comex surged nearly 5%, jumping $1,000 per ton above the London Metal Exchange (LME) benchmark. This spike, driven by tariff uncertainty, contrasts sharply with the LME’s more modest 1.2% rise, indicating a significant disparity between U.S. and global copper prices.
In the wake of these developments, Glencore and Trafigura have focused on sourcing copper from South America, though they are also exploring options to ship material from Asian warehouses tracked by the LME. However, sources suggest that these traders are cautious about the potential risks involved, as the time needed to transport copper to the U.S. might expose them to tariffs before their shipments arrive.
The tariff threat has opened an unprecedented profit opportunity for traders. With U.S. copper prices climbing to a premium of up to $1,300 per ton over international costs, traders can earn substantial margins, as the cost of shipping copper to the U.S. remains relatively low—around $300 per ton. Still, experts caution that this arbitrage opportunity is high-risk, with Alice Fox of Macquarie Bank noting that the uncertainty surrounding tariffs and transportation times creates significant potential for losses.
Despite concerns, the extended timeline of the Section 232 investigation into tariffs may allow traders to secure profits before any duties are imposed, potentially saving them hundreds of dollars per ton. While Trump’s previous threats of tariffs have caused some unease, the investigation could take months, leaving a window of opportunity for global traders.
However, the U.S. tariff proposal is already driving up costs for American copper buyers and reshaping global trade patterns. In a notable shift, there has been a surge in copper withdrawals from LME warehouses in Asia, with requests increasing by over 93,000 tons since Friday. This influx of demand could disrupt copper supplies worldwide, particularly in China, the largest consumer of the metal.
While the timing of the tariff imposition remains unclear, analysts predict that a 25% levy could arrive by the fourth quarter of this year. Such a move could harm traders who rely on swift transactions, but the lure of high profits continues to outweigh the risks for many.
The copper market’s response mirrors trends in other metals, such as gold, silver, and aluminum, where U.S. prices have surged relative to international prices, creating new opportunities for arbitrage. However, American manufacturers are feeling the pinch, facing an 8% higher cost for copper since Trump’s initial tariff proposals in January.
Another complication for importers is that only a select few copper producers are approved to deliver copper to Comex, with major Chinese smelters excluded from this list. Nevertheless, some Chinese smelters have found alternative routes by shipping refined copper to LME warehouses in Asia, where rising orders and price discrepancies have made exports to the U.S. more attractive. These smelters are now increasing their shipments to LME warehouses in anticipation of continued arbitrage opportunities.
While the profit margins from LME shipments are smaller than those available on Comex, Chinese smelters, facing low processing fees at home, are seizing the opportunity to increase exports, potentially shifting the flow of copper away from the U.S. market in the coming months.
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