Since Donald Trump returned to the White House, copper prices have surged dramatically, driven by a dramatic global inventory reshuffle tied to the risk that he may impose tariffs on the metal.
But as Trump's second term approaches its midpoint, many bulls in the market are starting to grow wary: if he fails to follow through on his promises, prices could collapse.
Until just a few weeks ago, New York copper futures consistently traded above the global benchmark set by the London Metal Exchange (LME), allowing traders to earn unprecedented profits by shipping copper to the United States before tariffs took effect.
In turn, inventories outside the US have fallen sharply, with a steady stream of imports into America creating a feedback loop that helped push LME prices to a record high near $15,000 per ton last month.
But with midterm elections approaching, investors across markets are questioning whether a strong Democratic showing could disrupt Trump's trade agenda — or even prompt him to double down on tariffs.
For copper bulls, the consequences could be far-reaching if Trump proves unwilling or unable to push tariffs through.
Analysts at Natixis SA warned that the tariff trade has created a bubble in one of the world's most important industrial commodities, and that bubble could burst quickly if tariffs are ruled out.
Macquarie Group said that in such a scenario, prices could plunge toward $10,000 per ton; while if tariffs are announced with a time lag allowing traders to ship more metal to the US, prices could rise as high as $18,000.
"I've never seen anything like this before — the future direction of prices ultimately depends on one person's decision," Alice Fox, a commodities strategist at Macquarie, said in an interview.
As the midterm elections approach, there are signs that traders are increasingly willing to bet that tariffs will not materialize, with their wagers concentrated on the spread between New York Comex and LME copper futures.
The two markets once moved almost in sync, but Comex prices — which would include the tariff burden if Trump imposes duties — have maintained a large premium over LME since Trump first formally proposed copper tariffs in February 2025.
Traders can sell Comex contracts and buy LME contracts to bring the two markets back into alignment.
But according to Marc Bailey, CEO of Sucden Financial Ltd., one of the largest brokerage firms in the market, such arbitrage activity had almost completely disappeared until recently.
The reason: if Trump actually pushes through tariffs, traders who sold Comex contracts could face massive losses.
But in recent weeks, Sucden has received inquiries from investors showing renewed interest in this trade.
Over the same period, the price spread between Comex and LME has collapsed, and the decline accelerated last month after Reuters reported that Trump's copper tariff plan was shelved due to concerns about its inflationary impact.
"Over the past few weeks, sentiment seems to have shifted somewhat," Bailey said in an interview in London. "People are starting to think about getting back in and testing the waters."
Reduced Shipments to the US
If this trend gains momentum, investors' growing "anti-tariff" bets through the Comex spread could have a major impact on the market — continuously offsetting the incentive for traders to ship more metal to the US.
In the physical copper market, according to ship-tracking firm Kpler, copper shipments from Africa to the US have been declining as the Comex spread collapses.
Despite growing doubts about tariffs, traders are also wary of one variable: Trump could suddenly announce tariffs after the midterm elections but before their cargoes reach port.
As the metals industry's annual gathering LME Week kicks off in London this weekend, the collapse of the Comex spread is adding fuel to a debate: whether gravity will finally catch up with copper prices as soaring energy prices, rising interest rates and a weak stock market threaten the demand outlook.
As these risks intensify, the sharply divergent supply dynamics between the US and the rest of the world provide another reason for traders to sell the Comex spread, according to Alastair Munro, a metals strategist at another major metals brokerage, Marex Group.
Recently, tightening supply on the LME has caused near-month prices to rise relative to Comex, narrowing the gap between the two contracts as delivery approaches.
For example, the September delivery contract fell more than $600 per ton in the month before delivery, with the Comex premium closing at less than $4.
"There's a greater willingness to sell New York and buy London, because the arbitrage naturally converges as contracts enter the delivery month," Munro said in a telephone interview in London. "The arbitrage is just one manifestation, but under a bearish macro view, the willingness to short copper more broadly is increasing."
A Polarized Debate
Admittedly, copper traders have been burned by Trump on tariffs before — most painfully last July, when he imposed a 50% tariff on downstream copper products but left the commodity-grade metal traded on futures markets untouched.
That caused Comex prices to plunge, but until recently they still maintained a considerable premium over LME because Trump left the door open for future levies.
Since then, the copper market has been mired in a polarized debate over "whether he will actually impose tariffs."
Despite growing doubts about tariffs, almost no one in the copper market expects him to rule them out entirely — because doing so could send the massive stockpile accumulating at US ports flooding back onto the international market.
One popular theory is that Trump's silence on tariffs is a deliberate "strategic ambiguity" designed precisely to prevent such a backflow.
But given the central role of tariffs in Trump's political agenda, some still expect him to push ahead — possibly as early as January 1, consistent with recommendations the US Commerce Department made to Trump last year.
"The key uncertainty is US tariff policy," said Grace Li, investment director at Shanghai Ducheng Private Fund Management Co. "With little visibility into the government's thinking, it's hard to make a direct directional call on whether to go long or short copper."
A Rare Opportunity
US copper inventories have grown so large that it could take manufacturers years to digest them.
At the same time, this surplus has created a rare opportunity for traders: buy inventory while selling futures contracts on Comex to lock in a small profit.
These so-called contango financing trades add further complexity to the debate over supply dynamics and next year's price outlook.
Such profits are meager compared to the windfall opportunities created by US import trade.
Nevertheless, analysts at Bank of America said the returns are still sufficient to prevent copper from flowing back to global markets — helping to support prices even if Trump backs down on tariffs.
For anyone bearish on copper, the risk that Trump will still push through tariffs remains hanging overhead.
According to the Commerce Department's recommendations, tariffs could be rolled out in phases: 15% in 2027 and 30% in 2028.
That could mean copper continues to be sucked into the US, reigniting the global bidding war that pushed prices to record highs.
China, as the largest consumer, has seen its inventories heavily depleted; if China is forced to restock while US imports surge, prices could spiral higher.
"They may have thought this round of stockpiling should have ended long ago by now," said Helen Amos, a commodities analyst at BMO Capital Markets Ltd. "What if they change their minds and think: 'Actually, this could go on for another two years'?"
Comments