ANALYSIS: US copper tariff could expedite ‘normal trade patterns’ - analyst

US President Donald Trump said on Wednesday he will introduce in three weeks a 50% tariff on copper imports, wrong-footing the market which was expecting 10-25%.

The announcement drove CME COMEX copper futures briefly to an all-time high on Wednesday while LME’s copper price fell so the COMEX-LME arbitrage was briefly over $2,600 per tonne, also a record.

Writing before Trump’s announcement on Wednesday, Natalie Scott-Gray, senior metals demand analyst at StoneX, argued in a research note an early resolution to the recent uncertainty could hasten a return to more normal market conditions.

Scott-Gray wrote: “The quicker that a tariff ruling is made on copper imports, the quicker we can see a return to normal trade patterns, which will start to east the extreme scarcity of copper units ex-US.”

“The higher the tariff level, the sharper the reverse back to normal trade patterns is set to be, given the added expense to ship material into the US,” she added.

The recent uncertainty about the US tariff regime has contributed to record volumes at the London Metal Exchange and CME Group, the two main international base metals markets.

The LME, owned by Hong Kong Exchanges and Clearing, reported in the second quarter its best three-month period for trading volume in more than a decade.

Separately, CME Group reported a record first half of 2025 for volume, driven partly by the US group's commodity markets including metals trading volume up 21% to a daily average of 848,000 contracts last month.

Scott-Gray told FOW: “If we look at trading volumes for copper across the major exchanges, the LME has posted its highest quarterly volumes since 2014, while on the CME, heighted trading activity has stemmed from the significant re-routing of material rather than from fund action alone, a reverse of what we typically tend to see.”

Historically, hedge funds preferred COMEX over the LME, the StoneX analyst added.

“Looking at current net positions, up until Trump’s announcement this week on 50% tariffs, the net long had remained almost unchanged since April, highlighting tariff market fatigue and perhaps investor caution over the outlook for copper in the global markets, given the uncertainty attached to wide-spread tariffs and Chinese recovery.”

Citing the move in time-spread on the LME and the cash-3M spread posting on Wednesday a contango for the first time since late April, Scott-Gray argues copper prices will likely return back to around $9,000 per tonne in the coming months.

“However, we are cautious that the extreme tightness ex-US will take time to unwind, especially if the investigation does extend for longer than the outlined timeframe of late July – early August.”

Trump started in February a Section 232 investigation into copper imports which has yet to be published.

Given the various factors in play, the LME-COMEX arb is likely to continue to be lucrative, Scott-Gray concluded: “The arb has been a very attractive play this year with both speculative traders and physical market players participating, benefiting from price volatility and changing global supply chains respectively.”