The global copper market is once again buzzing with a phenomenon known as the 'arbitrage trade' to the United States.
Simply put, the price for copper in New York (on the COMEX exchange) has become significantly more expensive than in London (on the LME), recently exceeding a $500 per ton premium. This large price gap creates a lucrative opportunity for traders to buy copper internationally and sell it in the US, leading to a rush of physical metal shipments heading for American shores.
But this isn't just a random market fluctuation. It's the result of a powerful mix of two major forces: US trade policy and a tight global supply chain. The core driver is political uncertainty. It all started in July 2025, when the US government brought copper into its 'Section 232' national security tariff framework. This move included a critical deadline: a report from the Secretary of Commerce due by June 30, 2026, which could recommend new, phased-in tariffs on refined copper for 2027 and 2028. The market is essentially pricing in the risk of these future tariffs, creating the US-specific premium.
This policy pressure is happening at a time when the global copper supply is already stretched thin. The International Copper Study Group (ICSG) forecasts a market deficit for 2026, meaning demand is expected to outstrip supply. This is due to various issues, from production disruptions at major mines to Chinese smelters cutting back on output. In a balanced market, shifting some copper to the US might not cause big waves. But in a deficit market, pulling large volumes—potentially 150,000 to 200,000 tons a month—to one region puts significant strain on inventories and availability everywhere else.
We are already seeing the real-world effects. Major trading houses like Trafigura have been reported to be planning large withdrawals of copper from LME warehouses to ship to the US. This physical movement validates the price signals, draining available stock from the global system and funneling it into COMEX-approved warehouses in the US, which have seen their inventories swell. The entire dynamic hinges on the upcoming Commerce Department report. Its recommendations will determine whether this US premium persists, intensifies, or collapses.
- Glossary
- COMEX/LME: Major commodity exchanges where metals like copper are traded. COMEX is based in New York and reflects the US market, while the London Metal Exchange (LME) is the global benchmark.
- Spread/Premium: The difference in price for the same commodity between two different markets or locations. A high premium in the US means copper is much more expensive there.
- Section 232: A part of US trade law that allows the president to impose tariffs on imports if they are deemed a threat to national security.