With the final deadline for the U.S. copper tariff assessment approaching, market focus is shifting back to the dynamics of 'tariff trades' and inventory stockpiling.
It is believed that overseas 'precautionary' stockpiling provides a solid foundation for copper fundamentals, while the recent acceleration in COMEX inventories, reflecting 'tactical' stockpiling, is likely to intensify a rally in copper prices and copper equities, with the year's high potentially reaching $15,000 per tonne.
This presents a compelling allocation opportunity driven by the combined forces of earnings leverage and valuation expansion in the copper sector.
Key Drivers Rekindling Market Sentiment
The resurgence of 'tariff trades' and U.S. copper stockpiling has reignited market sentiment. On June 1, 2026, LME and COMEX copper posted daily gains of 2.0% and 2.8%, closing at $13,897/tonne and $14,485/tonne respectively.
Reports indicate the U.S. Department of Commerce must submit an updated copper market assessment report to the administration by June 30, including recommendations on whether to impose import tariffs on refined copper.
A previous tariff plan effective from August 1, 2025, did not levy duties on refined copper, with a phased implementation starting in 2027 at an initial rate of 15%. The administration subsequently requested continued market tracking and a new assessment report by June 30, 2026.
As this deadline nears, stockpiling behavior triggered by 'tariff trades' is re-energizing the copper market.
Catalyst for Sector Performance
The materialization of 'tactical' stockpiling demand is expected to act as a catalyst for the copper sector. The U.S. has long maintained a 40-50% import dependency for refined copper.
The supply gap and tariff expectations have created a premium for COMEX copper over LME copper. During the window before potential tariff implementation, international traders, incentivized by arbitrage, are shipping refined copper to U.S. warehouses to capture the price difference.
Following tariff threats in February 2025, COMEX inventories accumulated 405,000 short tons over the full year. The COMEX-LME spread remained positive, averaging $675/tonne for the year, with peaks reaching $1,600/tonne and $3,000/tonne in late March and late July 2025, respectively.
As the tariff assessment deadline approaches, the visible rise in 'tactical' stockpiling demand is poised to drive sector strength.
First, after a period of reduced expectations following the postponement of certain mineral tariffs in mid-January 2026 and market disruptions, the COMEX-LME spread briefly returned to parity, averaging -$24/tonne from January to April 2026.
Since May 2026, with the assessment deadline looming, the spread has widened again, reaching nearly $600/tonne by June 1, 2026. COMEX copper inventories have concurrently climbed to a record high of 642,000 short tons.
Further spread widening from tariff trades could accelerate COMEX stockpiling.
Second, compared to hidden downstream inventory builds, COMEX inventories are transparent and offer stronger market signals. Analysis shows three previous periods of accelerated COMEX stockpiling since 2025—April-August 2025, September-October 2025, and November 2025-January 2026—each coincided with rising copper prices and sector performance.
With COMEX stockpiling accelerating again and macro sentiment from geopolitical tensions stabilizing, the rally is expected to broaden to LME copper prices and the broader copper sector.
Fundamental Support from Strategic Stockpiling
The fundamental driver behind 'tariff trades' and U.S. stockpiling lies in substantial long-term copper demand from AI development and manufacturing reshoring, coupled with heightened global supply chain controls for critical metals.
This has generated unprecedented inventory reserve demand among overseas downstream consumers. Data shows a significant surge in U.S. refined copper imports since March 2025, with monthly averages jumping from 66,000 tons (2020-2024) to 158,000 tons (March 2025-March 2026).
Compared to the approximate 500,000-ton increase in COMEX inventories since March 2025, the rise shown in U.S. import data is believed to reflect more hidden inventory flowing downstream.
A typical example is that despite the COMEX-LME spread nearly disappearing from January to April 2026, U.S. monthly refined copper imports remained above 170,000 tons from January to March 2026, indicating 'precautionary' demand is more sustainable than 'tactical' demand.
It is argued that copper prices found solid support around $12,000/tonne during the geopolitical tensions in March, underpinned by this hard-to-disprove precautionary demand factor.
Furthermore, given the current stockpiling scale exceeding one million tons, the trend of copper's strengthening strategic metal status, alongside AI development and its impact on copper demand, should not be underestimated.
Attractive Sector Allocation Opportunity
As of the close on June 1, 2026, a relevant copper index has fallen 3.1% year-to-date, underperforming copper prices by 13.7 percentage points and the broader market index by 1.8 percentage points.
Valuation compression has been more significant than the weakening of earnings expectations. Based on a $13,000/tonne copper price assumption, the estimated forward price-to-earnings ratio for the copper sector stands at just 9.8x, breaching the historical extreme level of 10x.
Supported by solid supply-demand logic, foreseeably low domestic inventory levels, heating U.S. 'tariff trades,' and stabilizing macro headwinds, copper prices are poised to challenge previous highs in the near term.
As macro pressures ease and fundamental catalysts—such as extreme weather, power grid investment, and explosive AI demand growth—materialize, copper prices have the potential to target $15,000/tonne.
The combination of earnings leverage and valuation expansion makes the copper sector increasingly attractive for allocation at current levels.
Potential Risks to Consider
Key risks include a significant decline in copper prices; U.S. copper tariffs being imposed later, in a different manner, or at a lower rate than expected; weaker-than-anticipated downstream demand; supply disruptions or substantial cost increases due to rising prices for inputs like sulfuric acid and diesel; liquidity shocks from escalating geopolitical conflicts; supply risks from extreme weather; and operational risks for Chinese companies' overseas copper mines.
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