By Lewis Jackson and Polina Devitt
BEIJING/LONDON (Reuters) -The once-mighty premium U.S. copper enjoyed over the global benchmark slid on Thursday as markets clawed back months of gains in hours of frenzied trading after President Donald Trump surprised markets with pared-back tariffs.
Trump said on Wednesday the United States would impose a 50% tariff on copper pipes and wiring, but the levy fell short of the sweeping restrictions expected and left out copper ores, concentrates and cathodes.
The surprise move dragged down U.S. copper prices more than 20% on the Comex exchange and unwound the premium over the London global benchmark that had grown in recent weeks, with shipments diverted into the United States in anticipation of higher domestic prices.
“We think the LME flips to a premium in the short term due to excess inventories in the U.S.,” Anant Jatia, founder and chief investment officer at Greenland Investment Management, a hedge fund specialising in commodity arbitrage trading, told Reuters.
“Over time Comex moves back to a premium as inventories draw and downstream tariffs leave a sustained U.S. premium.”
U.S. September Comex copper futures were last down 22% at $4.376 a lb or $9,647 a metric ton on Thursday, meaning a premium over LME copper of $27 a ton.
This compares with last week’s premium of $3,000. Benchmark LME copper fell 0.8% to $9,620.5 a ton.
WHAT HAPPENS TO US INVENTORIES
Months of hefty premiums had sucked in enormous volumes of copper from around the world since Trump first flagged the possibility of tariffs in February.
As recently as a few weeks ago, traders were still redirecting cargoes to the United States in a rush to get copper into the country before the tariffs.
Trump first teased the tariff in early July, implying that it would apply to all types of the red metal, ranging from cathodes produced by mines and smelters to wiring and other finished products.
Data provider Kpler said that 99,170 tons of copper were delivered by bulk carriers to the U.S. since July 8, when Trump said he would announce a 50% tariff on copper and his team added that the probable deadline would be August 1. This brought U.S. March-July copper imports to more than 550,000 tons.
Since the July 8 announcement only one vessel managed to leave its port of origin and deliver the cargo to the U.S. in time, according to Kpler. The vessel brought 14,998 tons of cathodes to a port in Hawaii.
Yet in a proclamation released by the White House, the administration said the tariff starting this Friday will apply only to pipes, tubes and other semi-finished copper products, as well as products that copper is heavily used to manufacture, including cable and electrical components.
Trump’s unexpected pivot now raises the question of whether some of the U.S. stockpile might be re-exported. Macquarie estimated earlier this month it would take nine months of normal consumption just to run down the inventories built up in the first half of the year.
Goldman Sachs said in a note on Thursday that Trump’s threat to potentially impose tariffs on refined copper in 2027 would keep U.S. and global prices near parity and limit any large scale re-exporting.
(Reporting by Lewis Jackson in Beijing, Polina Devitt, Pratima Desai and Eric Onstad in London, and Hongmei Li in Singapore; Editing by Michael Perry, Lincoln Feast, Kate Mayberry and Emelia Sithole-Matarise)
