A familiar trade is heating up in the copper market, and this time it’s all about dodging tariffs. Traders are scouring the globe for copper to ship to the US, hoping to avoid a 10% import tariff that could send prices skyrocketing.
The Copper Conundrum
The copper market has been in flux since 2019, when the US imposed a 25% tariff on imports of the metal.
The tariffs, aimed at forcing China to reduce its massive trade deficit with the US, had a ripple effect on global copper trade.
Copper producers and traders in countries like Chile, Peru, and Congo, which account for about 70% of the world’s copper supply, have been struggling to find buyers willing to take on the risk of the tariffs.
The New Trade: Copper arbitrage
Now, with rumors of a potential tariff increase to 10%, traders are looking for ways to exploit the price difference between US and non-US copper prices.
One way to do this is by shipping copper from countries that are exempt from the tariffs, like Chile and Peru, to the US.
According to Bloomberg, a 10% tariff would add about $1.50 to the price of a copper futures contract in the US. The difference in price between US and non-US copper could be enough to make the tariff trade worthwhile.
What this means
The copper tariff trade has the potential to disrupt the global market, causing copper prices to fluctuate wildly and leaving producers and traders to scramble for position.
For consumers, higher copper prices could mean higher costs for everything from electrical wiring to electronics.
The copper market is no stranger to volatility, but the potential tariff trade has the potential to upend a market that’s already worth $300 billion a year.
Cu’s wild ride is just getting started.
