Copper prices experienced a significant surge in the United States on Tuesday, driven by speculation surrounding potential import tariffs from President Donald Trump. The price of copper for May delivery soared to an impressive $5.2255 per pound, translating to $11,520 per tonne on the COMEX in New York. This remarkable increase surpassed the previous record high set on May 20, 2024. So far this year, the front-month contract has appreciated by approximately 29%, creating a notable disparity between US copper prices and the global benchmark established on the London Metal Exchange (LME).
Last month, President Trump instructed the US Commerce Department to initiate an investigation into potential copper tariffs on national security grounds. Following this announcement, the gap between New York and London copper prices has expanded, prompting traders to redirect copper shipments to the US in anticipation of possible tariffs. Renowned financial institutions, including Goldman Sachs and Citigroup, predict that the US may impose a 25% import levy on copper by the end of the year. This potential policy shift could significantly impact the global copper market.
Kostas Bintas, head of metals trading at Mercuria, indicated that around 500,000 tonnes of copper are currently being allocated to the US market, which is tightening supply in the rest of the world. Bintas also mentioned to Bloomberg that LME prices could surge above $12,000 per tonne, an increase from the current level of approximately $10,000, as the supply shortage intensifies.
In China, copper prices have entered a phase of modest backwardation, suggesting strong demand expectations. On Tuesday, the front-month April copper contract on the Shanghai Futures Exchange closed at 81,900 yuan ($11,277.88) per tonne, reflecting a 0.75% increase over the September contract. However, a copper trader remarked to Reuters that the current backwardation is mild, indicating robust demand rather than severe supply shortages.
Two additional traders noted that the pricing dynamics in China are affected by rising exports of refined copper and necessary smelter maintenance in March, which was prompted by restricted supply of copper concentrate. Recent customs data revealed a staggering 119% year-over-year increase in China's refined copper exports for the first two months of 2024. One trader commented, “A lot of copper has flowed to the United States, drawn by higher prices, leading to reduced imports.” Furthermore, as stockpiles continue to decline, China has also increased its cargo shipments in the early part of the year.
Overall, the copper market is experiencing significant fluctuations influenced by tariff speculations, shifting supply dynamics, and robust demand, particularly from China. As traders navigate this complex landscape, they remain vigilant about future developments that could further affect copper prices globally.
