Tariff Turmoil Drives Copper Prices to Record High

As the week got started, copper prices on the London Metal Exchange (LME) climbed to their highest-ever level as markets increasingly expected that President Trump would expand tariffs on imports to include refined copper.

The benchmark 3-month futures contract on the LME climbed by 0.8% and exceeded the record price that had previously been notched in January this year. A ton of copper is now trading at $14,533 on the LME.

The rise in copper prices over the previous 12 months has largely been supported by a supply squeeze that coincided with several major mines experiencing declining output while demand was surging as AI data center construction, upgrades to power grids and increasing electrification put pressure on existing supplies.

That said, short-term drivers have exerted a significant influence on prices, especially the imbalance in the location of existing inventories. Traders have been frontloading copper into the U.S. since last year when Trump indicated that he was considering imposing import tariffs on refined copper. To profit more, traders started shipping the metal to U.S. exchanges so that once tariffs are imposed, they could reap substantial profits from the elevated prices.

Two months have passed since the deadline by which the Commerce Department was expected to provide a report of their findings on whether import tariffs are warranted on refined copper.

The frontloading of copper supplies into the U.S. has squeezed supply in other major markets like Shanghai and London, pushing prices higher. This imbalance has created lucrative arbitrage opportunities as copper futures on the Comex have been trading at a significant premium since early last year when threats of tariffs first emerged from the White House.

The supply squeeze on the LME has been so serious that spot copper is now trading at a significantly higher price than futures contracts, a scenario referred to as backwardation. Backwardation typically indicates existing demand outstrips available supply.

The elevated copper prices have helped leading miners to rake in considerable profits from their operations. Rio Tinto, BHP, Zijin Mining and Glencore have all recently reported large bumps in their net profits as a result of more earnings from their copper sales.

However, not all copper miners have fared well during this time. Operational challenges, such as winter storms in Chile, have curtailed production and led to a drop in shipments to global markets.

Analysts are watching what impact these high copper prices have on the demand-side of the market. In the past, high prices have dampened demand in key markets like China, so entities like Collective Mining Ltd. (NYSE American: CNL) (TSX: CNL) and other stakeholders will be observing how buyers respond over the coming weeks.

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