Copper Hits Fresh Record on Rising Risk of Tariff-Fueled Squeeze

HG=F +2.78% ANFGF +7.34%

(Bloomberg) -- Copper rallied to a fresh record as a surge in orders to withdraw metal from London Metal Exchange warehouses compounded worries that potential US tariffs will fuel a global supply squeeze.

Futures rallied as much as 3.4% in London to trade above $11,500 a ton, surpassing a peak struck on Monday, after data from the LME showed a spike in orders for copper from its depots in Asia. Mining stocks also rallied, with Chilean copper producer Antofagasta Plc jumping more than 5% to a record high.

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Copper has been ratcheting higher in recent weeks as a growing chorus of traders and analysts have warned that global inventories could soon be drained to critically low levels as huge volumes of metal are shipped to the US in anticipation of tariffs.

The LME’s benchmark price is up more than 30% this year, with a series of major mine outages denting global supply. But US futures have rallied even further, with investors betting that President Donald Trump will announce levies on primary forms of the metal toward the end of next year.

“Of course with copper there is a really compelling fundamental story, and investors recognize that miners are having real difficulties maintaining and growing supply,” said Helen Amos, a commodities analyst at BMO Capital Markets Ltd. “But there’s also a price arbitrage between the US and the rest of the world, and that’s probably the most dominant factor driving prices higher at the moment.”

Trump first formally laid out plans to impose tariffs on copper in February, in an announcement that rocked the global industry and drove US copper imports to record highs. In late July, he wrong-footed the market by saying he’d limit the levies to value-added copper products, while pledging to review whether to push ahead with tariffs on commodity-grade forms of the metal from 2027.

The decision has had huge ramifications in the physical copper market, with traders once again ramping up shipments to American ports as US futures surge. Producers have also announced that they’ll charge record premiums to supply customers in Europe and Asia next year, with buyers in effect compensating them for the additional profits they could make selling to the US.

Major metals trader Mercuria Energy Group Ltd. last week warned that those trade dynamics could fuel a major global supply squeeze by the first quarter of next year, predicting that copper prices will push even deeper into uncharted territory.

Most of the copper in the LME’s warehousing network is of Chinese origin, which is already subject to US import tariffs, and Russian origin, which is banned from entering the country. However, these supplies could still serve customers in Asia, freeing up copper from countries such as Chile or Japan to be redirected to the US.

“Conversations with physical traders point to a larger-than-expected reacceleration of copper flows into the US in H1 2026,” analysts at Goldman Sachs said in an emailed note. Wednesday’s “copper price rally has been driven by LME cancellations, which are likely to free up metal to deliver to the US.”

At a fundamental level, the copper market has been hit by a slew of mine outages from Chile to Indonesia that have tightened supplies this year. The latest signs of strain came on Wednesday.

Ivanhoe Mines Ltd. trimmed the outlook for production from its vast Kamoa-Kakula complex in the Democratic Republic of Congo as it continues to recover from flooding earlier this year. Glencore Plc — which has seen a 40% drop in output since 2018 — also cut its target for next year, but said it’s looking to roughly double production over the coming decade.

The supply concerns have propelled copper prices higher, even in a tepid environment for demand. Goldman Sachs predicts that the market will be in a 500,000-ton surplus this year, with China experiencing a “material slowdown” in demand in recent months.

Still, the entirety of the global surplus has been built in the US, while the rest of the market has tightened, analysts including Aurelia Waltham and Eoin Dinsmore said on Wednesday.

Copper was up  to $ a ton as of 3:49 p.m. on the LME, taking gains for this year to more than 30%. Aluminum gained  while zinc edged up .

--With assistance from Winnie Zhu.

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