METALS-US copper tumbles on tariff news, LME erodes on tepid demand

By Eric Onstad

LONDON, July 31 (Reuters) - U.S. copper prices registered the biggest one-day decline on record on Thursday as investors scrambled to adjust positions after a surprise move by U.S. President Donald Trump to exclude widely traded refined metal from 50% import tariffs.

"The impact of the Trump announcement ... was seismic," said Marex analyst Ed Meir.

U.S. September Comex copper futures tumbled 22% to $4.37 per lb, or $9,638 a metric ton, by 1615 GMT, having touched a record peak of $5.92 a week ago.

After Trump announced an investigation into copper tariffs in February, U.S. prices climbed and huge flows of copper were shipped there to take advantage of the premium.

But details released late on Wednesday said 50% tariffs would be applied to semi-finished copper products, excluding copper cathodes and input materials such as ores.

Copper trading on major exchanges is based on cathodes, the result of processing copper.

"I'd imagine it's a disaster for some people," said Dan Smith, managing director at Commodity Market Analytics.

"You spent all this money getting stuff across to America and then, it's going to have to sit there, isn't it?"

Benchmark three-month copper CMCU3 on the London Metal Exchange dropped 0.9% to $9,608 a ton.

The slide in Comex prices flipped its premium over LME, which had traded at about $3,000 a ton last week, to a slight discount on Thursday although at times it fluctuated back to a modest premium.

If LME prices settle at a healthy premium to Comex, that could further boost LME copper inventories MCUSTX-TOTAL, which have already jumped about 50% over the past month.

"LME stocks could now rise much quicker on direct deliveries of U.S. copper to U.S. LME warehouses if price differentials attract it," JP Morgan said in a note.

Copper prices are likely to remain weak in the short term, partly owing to a seasonal lull in demand, Smith said.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 eased 1.3% to 78,040 yuan ($10,850.95) a ton.

Also weighing on prices was data showing that manufacturing activity in top metals consumer China shrank for a fourth month.

Among other metals, LME aluminium CMAL3 fell 1.4% to $2,564 a ton, zinc CMZN3 eased 0.9% to $2,761, nickel CMNI3 dropped 0.6% to $14,925, lead CMPB3 lost 1.1% to $1,969.50 and tin CMSN3 retreated 2% to $32,680.

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($1 = 7.1920 Chinese yuan)

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