London copper and New York copper both hit record highs! Tariff expectations and "mismatch" in inventories continue to drive momentum

On Tuesday, the 25th Eastern Time, the New York Mercantile Exchange (COMEX) copper futures for the current month and the London Metal Exchange (LME) three-month copper both set new record closing highs.

The cross-regional reallocation of inventories triggered by potential US copper tariffs remains a key driver of the sustained rally in overseas copper futures. At the same time, signs of tightening spot supplies in the LME market have been reinforced once again. Coupled with strong demand support from sectors such as power grids, data centers, defense, and electrification, this continues to boost bullish expectations for copper prices.

Meanwhile, the market awaits further clarification on US copper tariff policies, as well as Federal Reserve Chairman Powell’s speech at the Jackson Hole Central Banking Symposium this Friday. The former affects the global flow and stockpiles of copper, while the latter may influence the pricing of the dollar and other risk assets such as metals.

LME and NY Copper Post Three Consecutive Gains, Surging Over 2% in the Last Three Trading Days

Copper prices remained strong on Tuesday, with both LME and NY copper closing higher for the third consecutive trading day.

COMEX August copper futures rose 1.67% to $6.7095 per pound, setting a new record closing high with a cumulative gain of 3.86% over the past three sessions. The December NY copper contract jumped 1.8% at its daily high.

LME copper closed up $76, or about 0.53%, at $14,350 per ton—renewing Monday’s record close and gaining a cumulative 2.24% over three days.

LME copper finished Tuesday just below the intraday high, and is now only about 1.2% away from the intraday record high of $14,527.5 set in January of this year.

So far this year, copper prices have surged approximately 16%. With potential US tariffs, cross-regional inventory flows, and supply-side disruptions, the pricing logic of the copper market is undergoing a shift.

Potential US Tariffs Continue to Alter Global Copper Flows

One of the key drivers behind this round of copper price increases is the market’s expectation for US tariffs on refined copper imports.

Fearing that the US may impose tariffs on refined copper imports in the future, traders have continuously shipped copper to the US in advance to lock in potential tariff advantages. This has quickly increased US copper inventories, while inventory available for free allocation outside the US has come under pressure.

According to Reuters citing CRU data, COMEX copper inventories have now increased for 46 consecutive trading sessions, reaching a record 675,185 tons. Simultaneously, CRU previously forecasted a global copper market oversupply of around 639,000 tons by 2026.

On the surface, there appears to be no shortage of copper globally.

However, the issue is that more and more copper is being shipped to the US.

According to CRU copper analyst Robert Edwards, if the US continues to absorb copper at this current rate, the expected global oversupply may effectively disappear after factoring in copper that has flowed into the US and is difficult to redirect elsewhere in the short term. The actual market may be close to balance—or even shift to a supply shortage.

This has become the most noteworthy “mismatch” in the current copper market: Global copper inventory is not absolutely insufficient, but it is increasingly concentrated in the US, with available supply outside the US declining.

LME Inventories Under Pressure, Futures Discount Signals Tightness

While the US continues to absorb copper, LME inventories are also becoming another market focus.

In the past week, there has been a flurry of withdrawals from LME copper inventories. Bloomberg notes that a large amount of copper has been requested for withdrawal from LME warehouses this week, refocusing the market’s attention on the level of physical inventories available for trading and delivery.

Canceling warehouse warrants does not mean the relevant copper has already left the warehouse, but it does mean that this portion of metal is no longer freely available for immediate trading and delivery. Therefore, there may be a significant difference between the total LME inventory and the quantity of copper truly available for the market.

This tightening is already being reflected in the spot market.

Bloomberg data shows that on Tuesday, the LME spot copper price was $156 per ton higher than the three-month futures price—a clear futures discount. This means the spot price of copper is significantly higher than the forward contract, which typically reflects tightening short-term physical supply.

Previously, the tightness in the LME copper spot market was even more pronounced. The fierce short-term competition for spot copper once pushed the spot price far above the three-month futures price. Although the spread has narrowed from previous highs, the market remains alert to strong demand for physical delivery.

In other words, the current rally in copper prices is not driven solely by futures market capital; the spot market is itself signaling tight supply.

“Global Surplus” Coexists with “Regional Shortages”; Copper Enters a Special State

From a global perspective, the market previously expected copper supply to outpace demand.

But US tariff expectations are shifting this balance.

If large amounts of copper continuously flow into the US, these inventories still count as global resources but will be difficult to re-export to other regions in the short term. Particularly after the US officially imposes tariffs, re-exporting copper from the US to Asia or Europe may involve additional costs.

Thus, what the market is currently trading is no longer just “how much copper exists globally,” but rather where the copper is, and whether it can be supplied in time to the markets that truly need it.

Bloomberg cites StoneX Financial’s head of metals, Michael Cuoco, as saying that despite concerns over rising inventories, physical copper demand remains healthy; persistent supply issues, along with growing consumption in power grid, data center, defense, and electrification sectors, all support the copper price outlook.

Under these circumstances, rising US inventories do not necessarily signal a fundamental weakening of copper prices globally. In fact, by changing the distribution of inventories, they may intensify supply tightness outside the US.

Once Tariffs Take Effect, Copper Prices May Face “Shoe Dropping” Risk

However, how US copper tariff policies are ultimately implemented could become a critical turning point for copper prices going forward.

According to previous reports, the US Department of Commerce has submitted recommendations on copper imports to the White House, and the Trump administration may decide to impose a 15% tariff on refined copper imports starting in 2027, increasing to 30% in 2028.

If tariffs are implemented, copper flows into the US may intensify, growing inventories in the US while available inventories outside the US are put under pressure.

On the other hand, policy uncertainty itself is a key driver for current copper price increases. Once policies are finalized, the market may see a reversal—“buy the rumor, sell the news.”

Glencore CEO Gary Nagle previously stated that regardless of whether the final tariff is zero, 15%, or 30%, once the policy “shoe drops” and the market has a clear answer, copper prices may actually decline. This is because the US has already built up massive copper inventories, and due to high re-export costs, these inventories will be hard to return to the rest of the world.

Macquarie, however, believes that US inventories are already high enough to pose greater downside risk to copper prices, but if Trump ultimately implements tariffs, copper prices could still spike dramatically.

Therefore, the copper market currently operates under a unique two-way logic: Tariffs not yet implemented drive copper into the US in advance, causing a regional supply “mismatch”; if and when tariffs take effect, the market may reassess both US high inventories and global trade flows.

AI, Power Grid and Electrification Demand Continue to Provide Long-Term Support

Beyond the short-term disruptions caused by trade policy, copper’s long-term demand outlook remains robust.

With accelerated infrastructure construction for artificial intelligence (AI), data centers’ demand for electricity supply and grid infrastructure is growing rapidly. At the same time, electric vehicles, renewable energy, power grid upgrades, and defense also require large quantities of copper.

On the supply side, copper mining faces structural challenges such as long investment cycles, declining ore grades, and unexpected shutdowns. Disruptions from events like the closure of Indonesian smelters have also heightened concerns over insufficient supply growth in the future.

Amelia Fu, Chief Commodities Market Strategist at Bank of China International, believes that low inventories, mining disruptions, and Indonesian smelter shutdowns are tightening the market, and copper prices may set new all-time highs in the coming weeks or months.

This means that even if there is a policy reversal regarding US tariffs as a short-term variable, the copper market is still fundamentally supported by long-term supply-demand dynamics.

Powell’s Jackson Hole Speech Approaches, Dollar Trends as Another Variable

On the macro level, expectations for Fed policy also influence copper prices.

Bloomberg notes that recent comments by US Treasury Secretary Wally Adeyemo on debt management, along with last week’s significant intervention in the bond market, once weakened the dollar and supported metals including copper; the dollar has stabilized so far this week.

The market is now waiting for Fed Chair Powell’s speech at Jackson Hole on Friday, seeking new clues about the future direction of monetary policy.

For copper, which is dollar-denominated, if expectations for looser monetary policy strengthen and the dollar weakens, it may continue to provide financial support for copper and other industrial metals; conversely, a more hawkish Fed stance may strengthen the dollar and suppress copper prices to some extent.

At present, the core contradiction in the copper market remains the “mismatch” between total global inventories and available regional inventories. Persistent US copper absorption, tight LME spot supplies, and robust AI, grid, and electrification demand are jointly keeping copper prices strong near record levels.

How US copper tariffs are finally implemented, and whether the large inventories stockpiled in the US after policy implementation will alter global trade flows, will be the key variables determining whether this round of copper price gains can be sustained.