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Copper prices on the London Metal Exchange and the Chicago Mercantile Exchange have started to diverge again, echoing the dislocation seen in 2025, as the market positions for an anticipated US Department of Commerce update on refined copper imports due later this month.
But this cycle feels different from last year’s frenzy, and not just in scale. It’s shorter, tighter and running directly into a wall of warehouse constraints that didn’t exist when the first wave of metal started heading for the US in early 2025.
New Orleans, which currently holds roughly two-thirds of all CME copper stocks, is effectively full. Getting new warehouse space approved isn’t straightforward — CME rules require both truck and rail access, and finding suitable industrial sites near a working railway line in southern Louisiana is not as easy as it sounds.
Some metal is reportedly sitting dockside rather than inside warranted exchange sheds. That distinction matters enormously: copper left exposed long enough can lose the clips and bindings that make it LME-warrantable. If the trade reverses and that metal needs to move back into global circulation, some of it may no longer qualify.
The window is also much shorter than anyone had to work with last year. The 2025 arbitrage ran for several months before Washington pulled the rug in July.
This cycle has been open for only a few weeks, and the US Commerce Department’s June 30 update, which determines whether a phased tariff on refined copper is actually going ahead, is looming.
The LME-CME arbitrage is also a far cry from the record seen last year, when the CME traded at nearly $3,000 per tonne above the LME.
It’s a very different risk/reward to last year’s more leisurely build.
But what’s actually been going on in the background is more interesting than the current arbitrage.
Since the tariff threat first emerged in early 2025, around 541,000 short tons (roughly 491,000 tonnes) of refined copper has moved into CME warehouses, a more than fivefold increase that has transformed the US from a relatively small inventory hub into the dominant location for exchange stocks.
That dynamic has created what some market participants describe as a de facto strategic stockpile: one built not through government purchases, but through private trading decisions. The government spent nothing. It announced a possible tariff, let traders do the maths, and watched the metal arrive.
The buildup has been driven by a simple calculation: if Washington imposes tariffs on refined copper imports, metal already inside the US could become significantly more valuable.
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The question now is what happens next.
If refined copper tariffs are confirmed — starting with a proposed 15% from 2027 and 30% from 2028 — the holders of all that US-positioned metal collect their premium on day one.
But imports stop immediately, because there’s no longer any point shipping new metal into a tariff wall when there’s half a million tonnes already inside it. The stockpile gets consumed rather than replenished, and the US effectively runs on its reserves for a year or two.
Constructive for global prices, but the metal stays locked.
However, if tariffs are abandoned, the exit trade starts. The economics of re-exporting only work when LME commands a sustained premium over CME — enough to cover freight, financing and the work of moving copper back across an ocean.
When July 2025’s exemption landed, the arbitrage inverted almost immediately, and LME briefly went to a premium in early 2026. A clean ‘no tariff’ signal would likely do something similar, faster.
The third option, continued ambiguity, is potentially the most uncomfortable for the market to process.
Another delay, another “further study required,” another twelve months of traders paying storage costs on a bet that hasn’t paid out yet.
The recent June 1 proclamation adjusting derivative copper tariffs, effective June 8, didn’t resolve anything.
Meanwhile, copper in the rest of the world is tighter than the global inventory number suggests. LME and Shanghai Futures Exchange inventories are both materially lower than mid-2025 highs, though the drawdown has been uneven and volatile across exchanges.
Asian fabricators are stepping back from spot purchases; not because they’re well-supplied, but because LME prices are too high to justify it in a soft demand season.
At the same time, physical premiums in Shanghai have softened.
The export arbitrage to Southeast Asia opened briefly this week and then narrowed again. None of this looks like a market with too much copper. Instead, it looks like a market whose copper is in the wrong place.
On top of that, sulfuric acid shortages, due to a logistics disruption in the Middle East plus China suspending acid exports through December, are tightening the screws on SX-EW production in Chile and central Africa.
About 20% of global copper comes from the acid-intensive SX-EW process. Unlike a mine strike or a pit wall failure, acid constraints hit production within a quarter, not a year. This one is already being felt.
Amid this, demand is holding. Manufacturing PMIs across Asia moved into expansion and have stayed there. Grid investment is accelerating, while AI data centers don’t care much what copper costs because it’s a rounding error in their capital budgets.
The June 30 tariff update may resolve nothing — and that may be the point. Continued ambiguity keeps the metal flowing, the stockpile growing and someone else paying for storage.
In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Read more coverage on our dedicated Hotter Commodities page here.