ROI-US copper mountain still growing after December import surge: Andy Home

By Andy Home

LONDON, Feb 27 (Reuters) - The huge premium for delivering physical copper to the United States may have gone but the tariff trade tailwinds are still blowing hard.

U.S. imports of refined metal appeared to be waning after the White House pushed back a decision on imposing tariffs in July, collapsing the arbitrage between the CME-traded U.S. price HGcv1 and the London Metal Exchange (LME) international price CMCUO.

But inbound flows jumped again to almost 200,000 metric tons in December, driving U.S. inventories yet higher.

The U.S. sucked in 1.4 million tons of refined copper over the course of 2025, a year-on-year increase of 730,000 tons, according to the World Bureau of Metal Statistics (WBMS), which sources data from official customs statistics.

That year-on-year jump is a good indication of the size of the metal mountain now sitting in the country.

STOCKS STILL RISING

CME stocks rose by 452,000 tons last year, pretty much matching total deliveries to exchange warehouses after U.S. President Donald Trump announced a national security investigation into the country's copper import dependency in February.

Exchange inventory has increased by another 93,000 tons since the start of 2026 with the relentless build only now starting to show signs of slowing.

However, the flow of metal has not stopped; it has been redirected to LME warehouses in Baltimore and New Orleans.

LME stocks in the two locations have grown from zero at the start of January to 36,450 tons and 10,825 tons respectively with another 30,200 tons sitting in LME off-warrant storage.

The shift in delivery focus makes sense since the spot arbitrage has flipped from a CME premium to a CME discount relative to the LME price.

REDUCED TARIFF RISK?

CME prices are still trading at a sizeable premium to the LME on a forward basis, which suggests lingering uncertainty as to the likelihood of tariffs further down the line.

The Trump administration has flagged a potential decision around the middle of this year with the option of phasing in tariffs on refined metal from the start of 2027.

The imposition of 50% tariffs on imports of copper products such as tube and wire appears to be having the desired effect.

Inbound volumes of copper and alloy semi-manufactured products have fallen sharply since July, which is good news for U.S. fabricators and may persuade the administration to extend the measures to refined metal.

But since the core rationale of tariffs is to reduce U.S. import dependency, it might be argued that just the threat of tariffs on refined copper has already worked.

The United States has accumulated a strategic stockpile without it costing the U.S. taxpayer a cent.

THE SCRAP GAP

What might catch the White House's attention is the continued export flow of scrap copper.

Exports of secondary copper totaled over one million tons last year, a year-on-year rise of almost 10%, according to the WBMS.

While no-one has yet committed to building a new primary processing plant in the U.S., there has been significant investment in recycling capacity.

That makes the accelerating leakage of copper scrap increasingly problematic, particularly since the single biggest destination is China.

When the U.S. imposed tariffs on copper products in July last year, the Trump administration said it would require that at least 25% of "high-quality" scrap be retained for domestic consumption.

There's been no further clarification of what exactly constitutes "high quality" scrap and since the country already consumes around 40% of the secondary metal that it generates, the threshold is already met on paper at least.

But with the European Union mulling its own restrictions on "scrap leakage", this part of the copper supply chain may be more likely to see U.S. government action than refined metal.

That said, if the copper market has learnt anything over the last year, it's that pricing U.S. tariff risk is very tricky indeed.

(Andy Home is a Reuters columnist. The opinions expressed are his own)

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