We covered the topic of copper in our March 24, 2025 in-depth review. Now that the red metal has touched new and unexplored price heights we wish to give an update on the situation.
Of course, we confirm what we wrote previously and indeed invite you to go and read or reread its contents. In brief: we emphasized that copper had soared because of the announced duties of 25 percent (in line with those applied to steel and aluminum). The announcement effect had triggered a rush to import as much copper as possible into the U.S. to take advantage of the “duty paid basis,” i.e., exemption from duty once the copper was stored in COMEX warehouses.
Not surprisingly, the price explosion of the red metal after on Tuesday, July 8, the U.S. president announced 50 percent duties (twice as high as expected) sent prices soaring at the CME by about 17 percent in just a few hours. The mechanism is always the same: an announcement of heavy tariffs such that the trade of the affected commodity is significantly affected, but with enforcement not immediate, but postponed judiciously – we believe – to facilitate some negotiation. This postponement underlies the accumulation of copper reserves in the United States and explains well the ever-widening differential between the price of copper in New York and London. We update the chart we had previously offered on the spread between the two markets, limited to the last year and a half.
The March peaks, maximum spread amplitude never seen in previous decades, a similar spread came up again in June and almost doubled on July 8 (the intraday actually marked just a doubling).
In our March in-depth report, we advised caution in betting on the spread narrowing. Today we feel absolutely advised against such arbitrage. Although the imminent implementation of tariffs would lead to the closing of the window of opportunity offered by the massive import of the red metal into the U.S. under exemption, we do not believe that this is a good motivation to bet on closing the spread. In these trading days, one could always arrive at lower duty rates, however, leaving the way open for announced tightenings by the U.S. administration precisely on the tariff level that would lead to new spread widenings. Not to mention that in this climate of uncertainty deliberately caused by the U.S. president a further postponement of the application of a duty on copper would not be out of the question: after all, this is a material that is crucial for many industries around the world, but particularly in the star-studded country.
Instead, we urge not to lose sight of the contraction in copper supply, which could be the driver for further price increases in the red metal between now and the end of the year.
Disclaimer
This post expresses the personal opinion of the Custody Wealth Management employees who wrote it. It is not investment advice or recommendations, personalized advice and should not be considered as an invitation to engage in trading in financial instruments.
