To The Moon

Yesterday, LME copper fell 1.2%, dropping below the key $13,000 per ton level.
As a result, copper mining ETFs declined sharply overnight. $Global X Copper Miners ETF(COPX)$ fell 6.65% in a single day, $Sprott Copper Miners ETF(COPP)$ dropped 6.77%, and $SPROTT JUNIOR COPPER MINERS ETF(COPJ)$ declined 6.72%, all close to a 7% loss. This reflects how copper mining stocks tend to react more strongly to movements in copper prices. In contrast, $United States Copper Index Fund(CPER)$ , which tracks copper futures prices more directly, declined by a smaller 1.08%, highlighting that mining equity ETFs are typically much more volatile than the underlying commodity.

The direct trigger was a rapid increase in inventories on the London Metal Exchange. The latest data show that LME copper inventories rose by about 20,000 tons in a single day, a 7.9% increase, bringing total stockpiles to roughly 280,000 tons, the highest level in 16 months.

The core reason behind the inventory build is the end of the “US tariff arbitrage trade” that lasted for about a year. In 2025, markets widely expected the United States to impose tariffs on copper imports. As a result, copper prices on the New York Comex exchange traded at a persistent premium to those in London, with spreads at times reaching several hundred dollars per ton. Global traders shipped large volumes of copper into US warehouses to capture this arbitrage opportunity, pushing US inventories steadily higher.

In January this year, the US government decided not to impose broad tariffs on critical minerals. The price gap between the New York and London markets quickly narrowed, removing the arbitrage opportunity. Copper that had previously been diverted to US warehouses began flowing back into the global market, releasing supply within a short period of time and driving a rapid build in global inventories.

The shift in inventory structure has also reshaped the market’s supply-demand balance. Last year, large volumes of copper flowing into US warehouses led to declining inventories in other regions, creating a widespread narrative of a global copper shortage. As the arbitrage trade unwound, copper began returning to markets in China and Europe, inventories started rebuilding, and the market quickly moved from tightness to a phase of relative oversupply.

Demand has also started to weaken. China accounts for roughly half of global copper consumption, but many copper fabricators have recently reported a noticeable drop in orders. Some companies have seen first-quarter orders decline by around 10% to 20%. With copper prices near record highs, many firms are maintaining only minimal inventories, slowing their purchasing pace as high prices begin to suppress demand.

Elevated copper prices are also starting to alter material usage in downstream industries. Some manufacturers are turning to cheaper alternatives. For example, certain air conditioner models have begun replacing copper tubes with aluminum-zinc alloy components, significantly lowering production costs and retail prices by around 20%. This substitution effect is gradually weakening expectations for sustained copper demand growth.

With inventories rising, demand cooling, and the arbitrage trade ending, copper’s short-term fundamentals have clearly weakened. The rally previously driven by capital inflows is now facing real supply-demand pressure, and confidence in copper’s ability to remain at elevated price levels has begun to fade.

Do you think this signals the end of the current bull cycle in copper mining stocks?