As the metals industry gathers in Hong Kong for its annual shindig, the focus will be on the large amounts of copper being diverted to the U.S. due to President Donald Trump’s threat to impose tariffs on the metal.
Trump’s efforts to upend the post-war trading system have roiled metals markets and opened questions about the trajectory of global growth and the flow of commodities.
In February Trump ordered an investigation into the potential for tariffs on copper vital for energy transition technologies such as electric vehicles and solar panels, as well as wiring for power grids.
The possibility of tariffs on copper, which Trump placed on steel and aluminum in his first term, fueled a surge in COMEX copper (HGc1), taking prices to a record high of $11,633 per metric ton on March 26.
That premium over copper elsewhere in the world has sucked metal out of warehouses approved by the London Metal Exchange (LME) and redirected cargoes bound for China.
CME copper inventories are at an eight-year high of 152,919 metric tons, while LME warehouse stocks are down 34% since mid-February.
In China, stocks at warehouses monitored by the Shanghai Futures Exchange (ShFE) fell to 80,705 metric tons on 9 May, or around four days consumption according to JP Morgan, after weeks of withdrawals that peaked with the largest on record.
However a jump in stocks this week shifts the focus, at least temporarily, to whether Chinese demand is robust enough to squeeze inventories.
“I’m not surprised the metal is being sent back, we’re not seeing any real consumer demand in China,” a senior metals trader said. “The panic in China seems to be over, for now.”
China’s Yangshan copper premium (SMM-CUYP-CN), a key gauge of import demand, fell 8% last week to $95 a ton, its highest since December 2023 but reversing a steady rise since March.
Meanwhile the price differential between LME and COMEX copper has more than halved to some $600 a ton from a record above $1,570 in late March, raising questions about how long the U.S. will continue to exert a gravitational pull over copper stocks.
TARIFFS AND CHINESE SMELTERS
Attendees will also need to contend with the uncertainty created by the 90-day tariff reprieve agreed between the U.S. and China as they negotiate a new tariff settlement.
In the few short weeks they were in place, they had already cut into U.S. copper scrap exports to China, exacerbating a feedstock shortage among China’s copper smelters.
The industry already faces deeply negative margins as it ploughs ahead opening new smelters despite overcapacity and tight feedstock supply.
