Copper has been added to the US government’s list of critical minerals – the metals deemed vital to the country’s economic and national security.
Fortunately, the United States has already accumulated what is the world’s second largest copper stockpile, behind China’s state reserves.
It has done so without spending a dollar of federal money. Rather, the copper market has done all the work in the form of a yawning arbitrage gap between the US price traded by the CME and the international price traded on the London Metal Exchange (LME).
The pricing differential has already drawn massive amounts of physical copper into the United States. And it’s still doing so as the market bets that the critical mineral designation, first flagged in August, increases the chances of US import tariffs.
CME Premium to LME copper
Trading the gap
When US President Donald Trump ordered an investigation into copper imports on national security grounds in February, the market moved quickly to price in the potential for US import tariffs similar to those already imposed on steel and aluminum.
The CME spot premium over the London market stretched to almost $3,000 per metric ton at one stage in July, creating an extraordinary opportunity for the world’s largest traders to ship as much physical metal as they could get their hands on to the United States.
The premium imploded in July when the Trump administration blind-sided the market by imposing tariffs on imports of copper semi-manufactured products but deferring until July 2026 a decision on refined metal.
Tariff trade over?
So it seemed, but the arbitrage gap has been widening again. The spot CME premium has rebounded from under $100 per ton in August to over $300, while the 10-month forward premium is now priced at almost $800 per ton.
Sure, the current arbitrage gap is not nearly as wide as it was in July, but it’s more than enough to cover the physical costs of shipping units to the United States.
Global exchange stocks of copper
Market of first resort
This year’s tariff trade is visible in the form of rising copper stocks held by the CME, which has only domestic US delivery points.
CME stocks have mushroomed from a February low of 83,900 tons to over 335,000 tons. CME warehouses now hold more copper than the LME and Shanghai Futures Exchange combined.
Metal is still arriving in the CME delivery network every day, mostly at New Orleans but there have also been inflows at Baltimore, Salt Lake City and Tucson.
What’s on the CME may be just the tip of the iceberg.
Consultancy Benchmark Minerals Intelligence thinks there is in total between 731,000 and 831,000 tons of “economically trapped” copper in the United States. Trapped in the sense that it would now require a huge inversion of the arbitrage between the United States and the rest of the world to free up metal for re-export.
Indeed, given the renewed widening in the US premium, the likelihood is for more metal to join the growing copper mountain rather than move the other way.
US trade statistics have fallen foul of the government shutdown but refined copper imports were already over one million tons in the first seven months of the year, up almost 400,000 tons on the year-earlier period.
More recent export data from major copper suppliers such as Chile, Peru and Australia suggest no let-up in the physical tariff trade.
The United States remains the market of first resort for spare copper, which is why Europe’s largest producer Aurubis has been able to hike its premium for 2026 deliveries by an aggressive 38% to a record $315 per ton over the LME basis price.
US strategic stockpile
Market dynamics have generated a tectonic redistribution of global copper to the United States, where it is now locked in by the same dynamics.
Without anyone seeming to plan it, the country is successfully building what might be described as a strategic stockpile, just one held by the commercial rather than the state sector.
The stockpile is still growing and will continue to do so as long as the arbitrage allows traders to make an easy profit by scooping up metal everywhere else and sending it to a US port.
No-one knows how much copper is held by China’s Strategic Reserves Administration. It’s a state secret but a two-million ton target has floated around the market for many years.
The United States isn’t there yet, but it’s well on its way to building a similar-sized reserve.
There may, though, be yet another ironic twist in the copper tariff trade.
The Trump administration has said it will look again at US import dependency in July next year, with the option of phasing in a tariff on refined copper from 2027.
Every ton of copper clearing US customs reduces that dependency, even without factoring in the intended tariff booster to domestic production.
(The opinions expressed here are those of the author, Andy Home, a columnist for Reuters.) (Editing by Susan Fenton)
