US President Donald Trump’s decision to exclude refined metal from his proposed import tariff led to an immediate and significant drop of over 19% in COMEX copper.
Wednesday saw the most significant intraday decline on record, with prices dropping by 19%, though they later recovered some of these losses.
At the time of writing, the three-month copper contract on the London Metal Exchange was at $9,679 per ton, largely unchanged from the previous close.
Source: ING Research
Tariff impact and market reaction
Effective August 1, a 50% levy will be imposed on imports of semi-finished copper products.
The 50% levy will be imposed on copper pipes, wires, rods, sheets, and tubes, as well as copper-intensive goods such as pipe fittings, cables, connectors, and electrical components.
The White House statement clarified that this levy will not apply to imports of copper ore, concentrates, mattes, cathodes, or anodes.
Before the announcement, copper prices in the US were trading at a 28% premium compared to LME prices, as the market had anticipated the upcoming tariff.
“We now expect the Comex-LME premium to collapse from the current levels,” Ewa Manthey, commodities strategist at ING Group said in a note.
Record shipments of copper arrived at American ports after Trump first suggested a tariff on copper imports in January.
From January to May, US refined copper imports saw a substantial year-over-year increase of almost 130%.
Inventory surge and future outlook
Meanwhile, at COMEX warehouses, copper inventories have reached a 21-year high.
The US currently holds surplus inventory, which may now be re-exported.
Manthey said:
This will be bearish for LME prices with more copper now showing up in LME warehouses.
The White House announced that the copper tariff, enacted under Section 232 of the Trade Expansion Act, will not be added to the separate charges imposed on automobile imports earlier this year.
For products subject to auto tariffs, the import tax on vehicles takes precedence over the copper duty.
In the US, Trump utilised the Defense Production Act, a law empowering the president to mandate increased production of materials vital for national security.
This act was invoked to stipulate that a quarter of all high-quality copper scrap and raw copper produced domestically must be sold within the country.
The proportion of specific raw copper materials required for US sale is set to rise to 30% by 2028, and further to 40% in 2029.
“Copper prices should now move beyond the recent focus on US import tariffs that has dominated sentiment for most the year,” Manthey said.
Prices have been rising this year largely because the market has been front-running the tariff policy and not because the demand picture has been improving or because the supply has actually been tightening.
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