Copper Price Gap Becomes Tariff Thermometer

Copper's price gap has become an indicator of US trade policy, particularly regarding tariffs on refined copper. Historically, this gap was driven by supply and demand shocks from countries like China and South America.

Now, it's politics that's driving the market. The US government is reviewing whether to impose new tariffs under Section 232, a law allowing restrictions on imports for national security reasons.

Societe Generale notes that this review has flipped the old trade on its head. Investors are now reading the COMEX premium as a betting market on the likelihood of new duties. The Commerce Department has outlined plans to impose a 15% tariff starting January 1, 2027, and a 30% tariff on January 1, 2028.

The stakes are high, with copper futures reaching a record near $6.90 per pound in the past week, partly due to real demand. In July, US copper imports exceeded 200,000 metric tons, the strongest monthly total in 12 years.