US Copper Price Premium Soars to Record as Trump Tariffs Loom

The price of copper in the United States has surged to record levels as traders anticipate the potential impact of US President Donald Trump's plans to slap tariffs on industrial metals. The premium of US Comex copper futures HGc2 over those traded on the London Metal Exchange (LME) reached an all-time high of $920 per metric ton by 1820 GMT on Monday, February 11, 2025, up from $558 on Friday. This significant increase in the arbitrage gap between COMEX and LME copper prices reflects market sentiment towards Trump's trade policies and the potential implications for US copper imports and exports.

The record copper price premium is primarily driven by two key factors: Trump's trade policies and market speculation and arbitrage. Trump's announcement to slap new 25% tariffs on all steel and aluminum imports, on top of existing metals duties, and his plans to impose tariffs on copper, have significantly impacted the market. Additionally, the uncertainty surrounding these tariffs has led to increased market speculation and arbitrage activities, driving the surge in the premium of US Comex copper futures HGc2 over LME prices.

The surge in the copper price premium implies that the market is pricing in the equivalent of a 10.5% tariff on copper, according to Benchmark Minerals Intelligence. This increase in costs for US importers could make US imports less competitive in the global market, potentially leading to a decrease in US copper imports. Furthermore, the higher cost of copper in the US could make US producers less competitive in the global market, potentially leading to a decrease in US copper exports. These factors could disrupt global supply chains, leading to shortages or surpluses in certain regions and potentially impacting the overall copper market.

In the near term, the market will continue to react to any new announcements or developments related to Trump's trade policies, particularly regarding copper tariffs. Traders are likely to maintain their speculative positions, driving further volatility in the copper price premium. The premium may fluctuate based on the market's perception of the potential impact of tariffs on copper supply and demand dynamics.

In the long term, the evolution of the copper price premium will depend on broader trade policy developments, as well as changes in copper supply and demand dynamics. If Trump's tariffs on copper are implemented, the market may adjust to the new reality, leading to a stabilization of the premium. However, if the tariffs are removed or modified, the premium may revert to its pre-tariff levels. The long-term dynamics of the copper price premium will also be influenced by broader trends in the global copper market, such as increased demand from emerging markets or advancements in renewable energy technologies.

In conclusion, the record copper price premium on the US Comex reflects market sentiment towards Trump's tariff policies, with traders anticipating higher costs for copper imports. This could have implications for US copper imports and exports, including increased costs for US importers, reduced exports from the US, and potential supply chain disruptions. The surge in the premium is driven by Trump's trade policies and market speculation and arbitrage, with the market pricing in the equivalent of a 10.5% tariff on copper. The near-term and long-term evolution of the copper price premium will depend on trade policy developments and broader market dynamics.