Trump's watered-down copper tariffs almost crush Comex premium
Trump said on Wednesday the United States would impose a 50% tariff on copper pipes and wiring, but the levy fell short of the sweeping restrictions expected and left out copper input materials such as ores, concentrates and cathodes.
The surprise move dragged down U.S. copper prices more than 18% on the Comex exchange HGc2 and unwound a large part of the premium over the London global benchmark CMCU3 that had grown in recent weeks, with shipments diverted there in anticipation of higher domestic prices.
'We think the LME flips to a premium in the short term due to excess inventories in the U.S.," Anant Jatia, founder and chief investment officer at Greenland Investment Management, a hedge fund specialising in commodity arbitrage trading, told Reuters.
"Over time Comex moves back to a premium as inventories draw and downstream tariffs leave a sustained U.S. premium."
Benchmark LME copper gained 0.9% to $9,785 a metric ton after markets opened on Thursday.
U.S. September Comex copper futures HGc2 briefly hit $4.5095 a lb or $9,941.6 per metric ton, down 19%, shortly after the LME opened before moving back up to hover around 4.5635 a lb or 10,061 a metric ton.
At the low, the premium over the London benchmark had fallen to just $157 a ton from recent levels above $3,000 a ton.
That premium has sucked in enormous volumes of copper from around the world this year. As recently as a few weeks ago, traders were still redirecting cargoes to the United States in a rush to get copper in country before the tariffs.
Trump first teased the tariff in early July, implying that it would apply to all types of the red metal, ranging from cathodes produced by mines and smelters to wiring and other finished products.
Yet in a proclamation released by the White House, the administration said the tariff will apply starting this Friday only to pipes, tubes and other semi-finished copper products, as well as products that copper is heavily used to manufacture, including cable and electrical components.
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