Copper surged to its highest in over a month, nearing a US record, driven by a tightening physical market in China and renewed speculation that Washington will impose a tariff on refined metal. Deliverable copper stocks in warehouses monitored by the Shanghai Futures Exchange have plummeted 82% since early May, while LME inventories are down 28% over the same period. More than half of the 296,625 tonnes in the LME system on Tuesday were on cancelled warrants awaiting delivery, indicating severe supply tightness.
Comex copper for September delivery jumped 3.3% to $6.55 a pound ($14,440 a tonne) in New York, less than 2% shy of the record set in early June. Three-month copper on the LME rose 1.7% to $13,851 a tonne. The New York metal now holds a premium of nearly $600 a tonne, more than double Monday's gap, suggesting the market is pricing in a potential duty on US imports of refined copper. This decision awaits the White House after the Commerce Department's update on the US copper market was due at the end of June, proposing a phased duty of 15% from January 2027, rising to 30% in 2028.
The rally is further amplified by significant inventory builds in Comex warehouses, now holding a record 630,000-plus tonnes, largely accumulated on tariff expectations. ING commodities strategist Ewa Manthey noted that copper is being pulled higher by the tightening Chinese market, emphasizing the need for continued evidence of physical tightness to sustain the rally. Two separate tightness gauges in China are flashing: the premium for spot cathode over Shanghai futures climbed to 435 yuan ($61) a tonne, and the Yangshan premium importers pay to bring copper into China rose to $103 a tonne.
The squeeze extends to the smelting network, with satellite monitoring by Earth-i's SAVANT index showing 16% of global copper smelter capacity as inactive in Q2, with Chile experiencing a 25.4% inactivity rate, its highest since 2019. This corroborates a 12.9% year-on-year drop in Chile's copper output in May. Record-low treatment charges are also claiming casualties, with Japan's 354,000 tonne-a-year Onahama smelter expected to cease processing concentrates by early 2027.
Copper equities amplified the market move, with Southern Copper jumping 6.5% and Freeport-McMoRan 6.3%. Freeport-McMoRan's year-to-date gain is now 23%. Other major players like Teck Resources (up 3.7%), BHP (up 3.6%), Glencore (up 3%), Rio Tinto (up 2%), Lundin Mining (up 6.7%), and First Quantum (up 5.9%) also saw significant gains. Copper is now up about 16% in New York this year and 10% in London.
