Trump's watered-down copper tariffs crush Comex premium
Trump said on Wednesday the United States would impose a 50% tariff on copper pipes and wiring, but the levy fell short of the sweeping restrictions expected and left out copper materials such as ores, concentrates and cathodes.
The surprise move dragged down U.S. copper prices more than 20% on the Comex exchange and unwound the premium over the London global benchmark that had grown in recent weeks, with shipments diverted into the U.S. in anticipation of higher domestic prices.
"We think the LME flips to a premium in the short term due to excess inventories in the U.S.," Anant Jatia, founder and chief investment officer at Greenland Investment Management, a hedge fund specialising in commodity arbitrage trading, told Reuters.
"Over time Comex moves back to a premium as inventories draw and downstream tariffs leave a sustained U.S. premium."
U.S. September Comex copper futures were last down 22% to $4.359 a lb or $9,610 per metric ton on Thursday, meaning a discount over LME copper of $20 a ton.
This compares with last week's premium of $3,000. Benchmark LME copper fell 0.7% to $9,630 a ton.
Months of meaty premiums had sucked in enormous volumes of copper from around the world since Trump first flagged the possibility of tariffs in February.
As recently as a few weeks ago, traders were still redirecting cargoes to the United States in a rush to get copper into the country before the tariffs.
Trump's unexpected pivot now raises the question of whether some of that stockpile might be re-exported. Macquarie estimated earlier this month it would take nine months of normal consumption just to run down the inventories built up in the first half of the year.
Goldman Sachs said in a note on Thursday that Trump's threat to potentially impose tariffs on refined copper in 2027 would keep U.S. and global prices near parity and limit any large scale re-exporting.
Trump first teased the tariff in early July, implying that it would apply to all types of the red metal, ranging from cathodes produced by mines and smelters to wiring and other finished products.
Yet in a proclamation released by the White House, the administration said the tariff starting this Friday will apply only to pipes, tubes and other semi-finished copper products, as well as products that copper is heavily used to manufacture, including cable and electrical components.
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