Copper floods US as traders try to get the jump on Trump tariffs, but ‘Taco’ trend looms
Spurred by US President Donald Trump’s proposed new tariffs on cathode imports, copper shipments from across the globe are flooding into the United States. But analysts warn that should a so-called Taco scenario again unfold – as in, “Trump always chickens out” – copper prices in the US would likely fall in the short term. IHS Markit shipping data showed that more than 200,000 tonnes of copper…
Recent data reveals that copper shipments from around the world are pouring into the United States, driven by US President Donald Trump's proposed tariffs on cathode imports. However, experts caution that if a "Taco" scenario emerges, akin to past instances where Trump abandons his threats, copper prices in the US could plummet in the short term.
According to IHS Markit shipping data, over 200,000 tonnes of copper arrived in the US last month, marking the highest monthly inflow in 12 years. This surge pushed combined US-based inventories at the New York Commodity Exchange (Comex) and the London Metal Exchange (LME) above 740,000 tonnes. Furthermore, 110,860 tonnes remained stored at US ports as of Friday, per the LME's report.
Bloomberg noted a significant drop in stock levels at LME warehouses outside the United States this year, attributed to the US tariff threat pulling copper out of the Chinese mainland. In Shanghai's major bonded-warehouse hub, Lingang, warehouse managers have observed a decline in copper stockpiles to a multi-year low due to the tariff threat.
Analysts speculate that copper cargoes are being redirected from these warehouses to the US, primarily originating from South African and other African sources. This move followed a June 30 deadline set by the US for its commerce secretary to propose tariff-related recommendations. Zhou Xiaoou, head of base metals research at Zijin Tianfeng Futures, highlighted that Shanghai-area bonded warehouses typically experience seasonal fluctuations in copper inventory levels.
Nevertheless, the current sharp decline is unprecedented. Copper traders and producers are anticipating arbitrage opportunities, capitalizing on the current premium between Comex copper and LME prices, which reached up to US$600 per tonne late last month. The LME copper benchmark currently stands at around US$14,000 per tonne, while Comex futures are trading at approximately US$6.60 per pound.
The arbitrage margin is deemed sufficient to cover shipping, insurance, and warehousing costs. The US stock market and copper prices are interconnected, driven by the AI industry. If Trump implements tariffs in 2027, Comex copper will remain at a premium to LME prices, influenced by demand from the AI industry and US domestic consumption.
Conversely, should Trump abandon his tariff threat, leading to a "Taco" scenario, the US's role as the world's copper pool would dissolve, allowing copper to flow freely across global markets. In such a case, Comex prices would rapidly drop, reverting to being driven by macroeconomic fundamentals and global supply-demand dynamics.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
