A key question now is what will happen to the huge volume of copper that’s been shipped to the U.S. in anticipation of tariffs. (Oliver Bunic/Bloomberg)
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Copper rose as traders continued to digest President Donald Trump’s decision to spare the most traded form of the metal from his 50% tariff, while a deadly mine accident in Chile raised supply concerns.
Copper trading conditions started to settle on the London Metal Exchange, after the White House’s shock move last week to exclude refined metal from the newly imposed import levy. The decision sent U.S. prices plunging by a record 22% on July 31, pushing them back to parity with the LME’s global benchmark.
A key question now is what will happen to the huge volume of copper that’s been shipped to the U.S. in anticipation of tariffs, with the spreads between prices in London, New York and Shanghai likely to determine whether the metal flows back out quickly or remains in US ports. On Aug. 4, U.S. copper futures on CME Group’s Comex were trading about 1.8% — or $176 a ton — above those on the LME, undercutting the immediate rationale for exports.
“In the past, metal flowed between the CME and LME whenever the spread between those two prices moved outside a $.1.00-200/t band,” Bank of America analysts led by Irina Shaorshadze said in an emailed note. “As the trade flows normalize, the LME-CME spread should revert to the historical mean-reverting relationship.”
(Bloomberg)
Copper traders are also on alert for supply disruptions, after six people were killed in a tunnel collapse triggered by an earth tremor last week at El Teniente, which accounts for over a quarter of Chilean mining giant Codelco’s output. Underground operations are halted and — with the company launching an investigation into the causes — it’s unclear how long the stoppage will last or whether it will trigger changes to Codelco’s output goals.
El Teniente, one of the world’s biggest underground mines, produced 356,000 tons of copper last year. That volume is equivalent to more than a month of Chinese imports of refined copper.
The stoppage at El Teniente comes as the world’s copper smelters face intense competition to secure mine supply. Treatment fees — typically the main earner for smelters — remain at deeply negative levels on a spot basis, and plants in the Philippines and Japan have cut output or closed. Even in China, where output has remained robust, there is some speculation that production is reaching a limit.
Investors are also monitoring other unexpected mine disruptions, including at the massive Kamoa-Kakula complex run by Ivanhoe Mines Ltd. in the Democratic Republic of Congo. Still, Ivanhoe executives on Aug. 1 delivered an upbeat assessment on prospects for returning that mine to previous output guidance.
LME copper prices rose 0.6% to settle at $9,687.00 a ton at 5:53 p.m. local time. Other metals were mixed, with zinc up 0.8% and aluminum down 0.5%.
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