Copper Surges As Arbitrage Opportunity Drives US Imports

Copper prices have surged above $10,000 per metric ton on the London Metal Exchange (LME) for the first time since October. On LME, copper has gained 14% year-to-date, while U.S. copper futures surged 26%.

The price differential widened to $1,200 per metric ton, creating arbitrage opportunities. Since copper futures result in physical delivery on maturity, buyers have scrambled to move supplies into the U.S.

Between 100,000 and 150,000 metric tons of copper will arrive in the U.S. in the coming weeks, potentially surpassing the monthly import record of 136,951 tons set in January 2022.

Leading commodity traders, including Trafigura, Glencore, and Gunvor, have aggressively rerouted shipments, with additional warehouse space being secured in New Orleans and Baltimore to handle the influx.

Still, the 12% differential between the domestic and foreign copper prices is around half of anticipated copper tariffs.

On February 25, President Donald Trump signed an executive action directing the U.S. Commerce Department to investigate copper imports on national security grounds. Leading institutions, including Goldman Sachs and Citigroup, responded, predicting a 25% tariff on imported copper by year-end.

"Copper's rise is being driven solely by supply concerns surrounding the potential for universal tariffs to be placed on all imports of copper into the US," Natalie Scott-Gray, a senior metals demand analyst at StoneX, said, warning about the high reliance on foreign copper.

According to ING, in 2024, the U.S. imported 850,000 tons of refined copper, excluding scrap. Chile was the largest supplier, accounting for 41% of imports, while 27% came from Canada.

Despite efforts to increase local production, output has steadily declined, falling 3% in 2024 after an 11% drop in 2023. Freeport-McMoRan (NYSE:FCX), the largest U.S. producer, has faced declining ore grades, environmental regulations, and permitting challenges, limiting the ability to ramp up domestic supply.

The firm's CEO, Kathleen Quirk, has called for Trump's administration to classify copper as a critical mineral, anticipating a $500 million windfall from tax credits tied to the Inflation Reduction Act. Quirk sees Freeport's domestic production growing by 8%, targeting an output of 225,000 metric tons, none of which will be exported.

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