3-month LME copper is testing 10,000 \$/b once again, and cash has already broken through. Demand from customers in the US, trying to get their hands on the metal ahead of possible copper import tariffs have continued. The draw from ex-US inventories remains strong as a result (as seen in the inventory chart below) and the supply tightness can be seen in the backwardation at the front of the forward curve. The US meanwhile is building inventories and should a tariff come into force, the backwardation may well collapse as US consumers could use their excess inventories to draw from for some months.
The immediate question is if the US is able to reach agreements on trade deals. It is looking more likely we will see some results soon with reports of progress in talks, which has lifted risk appetite, and the S&P 500 reached a record high yesterday. With a week to go before the deadline, there are still many unknown details. Any agreed tariffs are likely to be higher than those in place before “liberation day” which could dampen trade and in turn copper demand.
A weaker dollar seems to be adding some fuel to the fire, with non-dollar denominated buyers benefiting from buying in other currencies. Indeed, this is helping many commodities priced in dollars.
Output in Chile appears to have improved after a number of operational setbacks. May production rose 9.4% compared to May 2024 and the best month so far this year.
The Section 232 copper executive order has until late November to produce a report on the impact of implementing tariffs on US copper imports. Until this is available, we may well see prices grind higher from here and backwardation steepen. On the contrary, if this is released much sooner prices could drop sharply.
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