LME copper fell sharply on 8th July after Trump said he would implement a 50% tariff on copper imports into the US from 1st August, in line with tariffs on steel and aluminium. 3 -month LME copper fell to 9,600 \$/MT Fundamentals in the copper market have tightened significantly over the last few months as US importers of the metal have been buying ahead of the implementation of any tariff. There is now a stockpile of the metal sitting in the US and will take several months of destocking to normalise. Reduced demand from the US over the coming months, once the tariff is in place, should allow inventories elsewhere to build and reduce pressure on prices.
There is however still a lot of uncertainty about the tariff as the market waits for final details. Last week Trump announced a trade deal with Indonesia stating that “Indonesia will remove restrictions on exports to the United States of industrial commodities, including critical minerals” and also that the US “may also identify certain commodities that are not naturally available or domestically produced in the United States for a further reduction in the reciprocal tariff rate”. A reduced tariff rate may not be the case for copper given the US does have naturally available copper and any exemptions on refined copper could contradict Trump’s policy of self-sufficiency. With the trade deal deadline approaching and many still to be negotiated we can consider that tariffs are likely to be higher than those in place before “liberation day” which could dampen trade and in turn copper demand.
Only a few days ago LME copper reached 9,950 \$/MT, it has softened since back to 9,800 \$/MT. LME copper inventory has been falling this year so far but paused in July. The backwardation at the front of the forward curve has flipped back into contango, later dated contracts are priced higher than nearer dated contracts, this indicates the market is less tight. It could be that the market is waiting on the finer details of the tariff and trade deals this week to move through the recent low of 9,600 \$/MT or high of 9,950 \$/MT.
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