London copper and New York copper both hit historic highs! Tariff expectations and inventory "mismatches" continue to drive momentum.

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On Tuesday the 25th Eastern Time, both the nearby copper futures contract on the New York Commodity Exchange (COMEX) and the three-month copper contract on the London Metal Exchange (LME) set record closing highs.

The cross-regional inventory reallocation triggered by the potential US copper tariffs remains an important driving force for the continued rise in overseas copper futures, while signs of tightening spot supply on the LME market have been strengthened again. Combined with strong demand from power grids, data centers, defense, and electrification, these factors continue to push up bullish expectations for copper prices in the market.

Meanwhile, the market is waiting for further clarification of US copper tariff policies and Fed Chair Waller's speech at the Jackson Hole central bank symposium this Friday. The former concerns global copper inventories and trade flows, while the latter may affect the pricing of the US dollar and risk assets such as metals.

London and New York copper soar for three consecutive sessions, up over 2% in three trading days

Copper prices remained strong on Tuesday, with both London and New York copper rising for the third straight trading day.

COMEX August copper futures closed up 1.67% at $6.7095 per pound, setting a record closing high, with a cumulative gain of 3.86% over the last three trading days. New York copper's December contract hit a daily high with an intraday increase of 1.8%.

LME copper futures closed up $76, about 0.53%, at $14,350 per ton, refreshing Monday's record closing high, with a cumulative gain of 2.24% over the last three trading days.

London copper’s Tuesday closing price was only slightly below the intraday high, about 1.2% away from the intraday record high of $14,527.5 set in January this year.

Since the start of the year, copper prices have risen by about 16%. Under the combined influence of potential US tariffs, cross-regional inventory movements, and supply-side disturbances, the logic behind copper market pricing is undergoing change.

Potential US tariffs continue to alter global copper flows

One of the main drivers of the current copper price rally is market expectations for US refined copper import tariffs.

Due to concerns about possible tariffs on refined copper imports into the US, traders have been shipping copper to the US in advance to secure potential tariff advantages. This has led to a rapid increase in US copper inventories, while inventories available for free allocation outside the US are under relative pressure.

Reuters, citing CRU data, said COMEX copper inventories have now increased for 46 consecutive trading days, reaching a record 675,185 tons. Meanwhile, CRU previously projected a global copper market surplus of about 639,000 tons in 2026.

On the surface, the global copper market is not short of copper.

But the issue is that more and more copper is being shipped to the US.

CRU copper analyst Robert Edwards said that if the US continues to absorb copper at the current pace, the globally expected supply surplus—after subtracting the copper that has flowed into the US and is unlikely to flow back out in the short term—may actually be close to a supply-demand balance, or even a supply shortage.

This makes the current copper market’s most noteworthy "mismatch": Global copper inventories are not absolutely insufficient, but inventories are increasingly concentrated in the US, and available supply outside the US is decreasing.

LME inventories under pressure as futures discount conveys tight supply signals

As the US keeps absorbing copper, LME inventories are becoming another market focus.

In the past week, the market has seen large withdrawals of copper from LME stocks. Bloomberg reports that this week, considerable volumes of copper have been requested for extraction from LME warehouses, bringing renewed attention to the level of inventories available for trading and delivery.

Canceling warehouse warrants does not mean all the relevant copper has left the warehouse, but it does mean those metals are no longer freely available for trading and delivery. Thus, the total LME inventory may differ significantly from copper that is truly available for market allocation.

This tightness is reflected in the spot market.

Bloomberg data shows, on Tuesday LME spot copper prices were $156 per ton higher than the three-month futures price, indicating a pronounced futures discount. This means the spot copper price is significantly higher than deferred contracts, usually reflecting tightening short-term physical supply.

Previously, tightness in LME copper spot was even more severe. Intense competition for spot copper caused spot prices to diverge sharply above three-month futures. Although the gap has narrowed somewhat recently, the market remains wary of large withdrawal demands.

In other words, the current copper price rally is not just driven by futures market capital; the spot market itself is signaling supply tightness.

“Global surplus” and “regional shortages” coexist as copper enters a special state

From the global total, the market previously expected copper supply to exceed demand.

But US tariff expectations are changing this balance.

If large amounts of copper continue to be shipped to the US, these inventories, although still part of global copper resources, are unlikely to flow back out to other regions in the short term. Especially if the US formally imposes tariffs, re-exporting copper from the US to Asian or European markets may incur additional costs.

Thus, the market is no longer just trading "how much copper the world has," but where the copper is and if it can be supplied in time to the markets that truly need it.

Bloomberg quoted Michael Cuoco, head of metals at StoneX Financial, as saying that despite concerns about rising inventories, physical copper demand remains healthy; ongoing supply problems and rising consumption in power grids, data centers, defense, and electrification all support copper price prospects.

Under these circumstances, rising US inventories do not necessarily signal global copper price fundamentals weakening—rather, changing inventory distribution may intensify supply tightness outside the US.

Tariffs, once imposed, may pose “shoe drops” risk for copper prices

However, how US copper tariffs eventually unfold may become a key turning point for copper prices.

Previous reports say the US Commerce Department has submitted recommendations to the White House on the issue of copper imports. The Trump administration may decide to impose a 15% tariff on refined copper imports from 2027 and raise it to 30% in 2028.

If tariffs are imposed, copper flows to the US may strengthen further, and US inventories will continue to rise while accessible inventories outside the US will come under pressure.

But on the other hand, uncertainty in tariff policy is also an important factor driving copper's price rise. Once the policy is clear, the market may reverse with “buy the rumor, sell the fact.”

Glencore CEO Gary Nagle previously stated that regardless of whether the final tariff is zero, 15%, or 30%, once the “shoe drops” and the market gets a clear answer, copper prices may fall. The reason: the US has already accumulated large copper inventories, and these, once inside the US, are hard to re-export elsewhere due to costs.

Macquarie believes US inventories are already high enough to bring greater downside risk to copper prices, but if Trump ultimately implements tariffs, copper prices may see another surge.

Thus, the copper market currently faces a quite special two-way logic: Tariffs not yet implemented drive copper to flow in advance to the US, causing regional supply mismatch; once tariffs are in place, the market may reassess high US inventories and global trade flows.

AI, power grid, and electrification demand provide ongoing long-term support

Aside from short-term disturbances caused by trade policy, copper's long-term demand outlook remains strong.

The accelerating construction of AI infrastructure is increasing demand for power supply and grid infrastructure in data centers. Meanwhile, electric vehicles, renewables, grid upgrades, and defense all rely heavily on copper.

Copper mining supply faces structural issues such as long investment cycles, declining ore grades, and sudden shutdowns. Supply disruptions like the shutdown of Indonesian smelters further reinforce concerns about insufficient future supply growth.

Amelia Fu, Chief Commodity Market Strategist at Bank of China International, believes low inventories, mine supply interruptions, and Indonesian smelter shutdowns are tightening the market, so copper prices may still hit new highs in coming weeks or months.

This means even if the US tariff—this short-term variable—eventually reverses, the copper market still has long-term support from supply and demand fundamentals.

Waller’s Jackson Hole speech approaches, dollar trend adds another variable

On the macro level, Fed policy expectations also impact copper prices.

Bloomberg reports that US Treasury Secretary Benson's prior statements on debt management and last week’s large-scale bond market intervention led to a temporary weakening dollar and supported metal prices, including copper. This week, the dollar’s trend has stabilized.

The market is now awaiting Fed Chair Waller’s speech at the Jackson Hole symposium on Friday for clues about future monetary policy direction.

For copper priced in dollars, if the market further expects accommodative monetary policy, a weakening dollar may continue to provide financial support for industrial metals like copper; conversely, if the Fed delivers more hawkish signals, a rising dollar might exert some pressure on copper prices.

Currently, the core contradiction in the copper market remains the “mismatch” between total global inventories and regionally available inventories. Continued US absorption of copper, tightening LME spot supply, and demand from AI, power grids, and electrification together keep copper prices strong at historical highs.

How US copper tariffs ultimately unfold, and whether the large copper inventories stockpiled in the US post-policy implementation change global trade flows, will be the key variables determining whether this round of copper price increases can sustain.

Risk warning and disclaimerThe market carries risks and investments require caution. This article does not constitute individual investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable to their specific situation. Investment based on this is at your own risk. ```