The price premium for copper in the U.S. compared to other markets is prompting traders to ship hundreds of thousands of tons of the metal to the United States. As copper inventories become increasingly concentrated in the U.S., LME deliverable stocks continue to decline, further intensifying pressure on spot supplies.

Copper prices on the London Metal Exchange (LME) hit an all-time high following weeks of gains. Traders have accelerated shipments to the U.S.—further tightening short-term supplies elsewhere—amid market bets that U.S. President Donald Trump might expand the scope of copper tariffs to include refined copper imports.

Benchmark three-month LME copper rose as much as 0.8% on Monday to touch $14,533 per tonne, surpassing the previous record set in January, before paring some gains. Copper prices have risen 17% year-to-date and 47% over the past 12 months.

Tariff Expectations Reshape Global Copper Flows

Shifts in trade flows have been a more immediate driver of recent copper price movements. Traders are capitalizing on the price premium in the U.S. relative to other markets to ship hundreds of thousands of tons of copper there, seeking arbitrage profits driven by tariff expectations.

Although the U.S. Department of Commerce was originally scheduled to submit a report to the White House two months ago recommending whether tariffs on copper were necessary, the market continues to price in the possibility of additional tariffs on primary copper imports.

Cristián Cifuentes, a senior analyst at the Chilean copper research organization Cesco, stated: "The main driver of this market move is not an excess of final demand, but rather a reallocation of copper caused by tariffs. It is a case of localized shortages rather than a global demand surplus."

The influx of large volumes of copper into the U.S. has altered the structure of global inventories. While total global copper stocks remain relatively high, inventories are increasingly concentrated in the U.S., whereas copper levels within the LME’s global warehouse network continue to fall; this reduction in short-term available supply has intensified pressure on short sellers.

Last month, LME inventories dropped to critical lows, triggering a short squeeze. While recent deliveries have eased some pressure, the LME spot copper price remains significantly higher than the three-month futures price—a state known as "backwardation"—indicating that near-term supply remains tight.

Congolese Copper Flows Increasingly into the US Market

High prices in the US market are primarily driven by the premium of COMEX copper prices over LME prices. This price spread offers traders significant arbitrage opportunities and encourages US buyers to increasingly source copper from the Democratic Republic of the Congo (DRC).

US trade data shows that copper cathode imports from the DRC hit a record 53,290 tonnes in July, accounting for 23.9% of total US copper imports for the month. Total US copper imports exceeded 220,000 tonnes that month, as traders rushed to ship in copper ahead of potential tariffs.

This shift is particularly striking given that total US imports of Congolese copper for the entire year of 2024 amounted to less than 32,000 tonnes. With rising production, the DRC now has more copper available for export.

Congolese copper is currently ineligible for delivery against COMEX contracts. Albert Mackenzie, a copper analyst at Benchmark Mineral Intelligence, noted that this means the metal likely enters the US spot market directly, often at a lower price than COMEX-deliverable brands.

Mackenzie pointed out that during parts of the summer, COMEX copper prices traded at a premium of $400 to $600 per tonne over LME prices; consequently, it may be more cost-effective for US end-users to purchase Congolese copper that is not registered for COMEX delivery.

Two industry sources confirmed that Congolese copper is typically priced based on LME rates. One source stated that the product usually sells at a discount of $550 to $800 per tonne below the LME price to offset transportation costs.

The quality of Congolese copper has improved significantly in recent years, boosting its acceptance among US consumers, including copper rod plants and tube manufacturers.

Supply-Side Challenges Continue to Support Copper Prices

The long-term upward trend in copper prices remains underpinned by supply-demand dynamics. Major global copper mines are grappling with aging infrastructure, while demand driven by data centers, renewable energy, and power grid expansion continues to rise, making it increasingly difficult for mine supply growth to keep pace with consumption. High copper prices have significantly benefited major global mining companies. Recent financial reports from Rio Tinto, BHP, Glencore, and Zijin Mining all show substantial profit growth, driven largely by the strong performance of their copper operations.

However, supply-side issues persist. Several major miners have faced operational challenges this year, and Chile's copper export revenue fell to its lowest level in over a year in August. If mine supply does not recover in the second half of the year, global mined copper production could see its first annual decline since 2017.

Michael Cuoco, Head of Metals at StoneX Financial, noted that the combination of rising demand and supply-side challenges "should drive a further tightening of market supply and demand, thereby supporting higher copper prices."

Meanwhile, factors such as the conflict involving Iran and rising US financing costs are putting pressure on global capital-intensive manufacturing, and high copper prices could prompt buyers to seek alternative materials. Yet, so far, these demand-side pressures have not stopped copper prices from repeatedly hitting record highs. (Source: Jin10 Data)

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