Copper prices have surged, with futures on the London Metal Exchange approaching $14,000 a ton, the highest in two months. This increase is largely attributed to ballooning copper volumes held in the US and the looming decision by President Donald Trump on potential import tariffs. In July, over 200,000 tons of copper, the largest monthly volume since 2014, arrived at US ports, exacerbating a significant stockpile in American warehouses and ports.
This influx into the US has led to nearly two-thirds (64%) of visible global inventories now being held in the US. This, combined with strategic stockpiling and import arbitrage, has diverted supplies away from other global markets, intensifying a global supply squeeze. Natalie Scott-Gray, senior metals demand strategist at StoneX, notes that inventories on the London Metal Exchange and Shanghai Futures Exchange are currently below their five-year averages, indicating a "real world physical tightness."
Beyond tariff concerns, the market is also grappling with supply disruptions and surging demand. Chile, the world's largest copper producer, recently downgraded its output by 2% to 5.3 million tonnes for the year, and recent winter storms there have further amplified supply risks. While the immediate impact of these storms is considered limited, any prolonged outages could tighten the market further. Demand for refined copper is also robust, fueled by its use in power grids and AI infrastructure, as well as in manufacturing smartphones, electric vehicles, and household appliances. Ewa Manthey, a commodities strategist at ING, highlighted that supply is increasingly struggling to keep pace with this rising demand.
Analysts believe that another record high for copper prices is not out of the question this year, especially with speculative net long positions prevailing across major exchanges. Prices previously hit an all-time high of $13,643 per metric ton ($6.70 per pound) on June 2. The US administration's actions regarding Section 232 tariffs remain a significant unknown, as a report expected to update the necessity of new tariffs on refined copper imports could further influence prices, potentially suggesting duties of 15%.
This tight market is also characterized by a battle for supply between the US and China. The White House has previously noted that a single foreign producer dominates global copper smelting and refining, controlling over 50% of global smelting capacity. This concentration, coupled with the US's growing focus on supply chain security, creates a challenging environment for the global copper industry.
