Copper price sets fresh US record as tariff-driven hoarding meets shrinking supply

Record Highs Driven by Tariff Speculation and Supply Deficits

The price of copper has surged to an unprecedented all-time peak in New York trading, propelled by a dual force: aggressive stockpiling in anticipation of U.S. import duties and a progressively tightening global supply landscape. September delivery contracts on the Comex reached a high of $6.7045 per pound (equivalent to $14,781 per tonne), eclipsing the prior intraday record established in mid-May. This latest advance represents a gain of approximately 17% for New York-traded copper year-to-date. In London, the benchmark LME contract briefly breached the $14,000 per tonne mark, nearing its January all-time high of $14,500, with the market exhibiting a strong backwardation structure indicating immediate availability scarcity.

The premium of prompt LME copper over three-month contracts has widened significantly, exceeding $100 and reaching its most extreme point since January. Furthermore, the spread between New York and London prices has ballooned, with Comex metal trading at a substantial premium of around $640 per tonne, a stark contrast to the average $350 premium observed in July. This divergence highlights the intense demand and supply pressures specific to the U.S. market.

Traders are acting decisively ahead of a formal U.S. tariff decision. Commerce Secretary Howard Lutnick’s June 30 deadline for recommending duties on refined copper imports, potentially starting at 15% in 2027 and escalating to 30% by 2028, has passed without a public announcement. The administration is also considering extending existing tariffs on semi-finished goods to raw copper, and has recently expanded its inquiry into additional product categories subject to Section 232 duties. This uncertainty, however, is directly fueling market activity.

The influx of copper into U.S. ports in July was staggering, with over 200,000 tonnes arriving, marking the largest monthly volume recorded in available data stretching back to 2014. Total U.S. holdings, encompassing both exchange-registered and private inventories, are now estimated to be well over 1 million tonnes. As one market observer noted, "The tariff arbitrage is ruling the roost over demand growth." This dynamic underscores how speculative positioning and tariff anticipation are currently overshadowing fundamental demand indicators.

Geopolitical Shifts Offer Broader Market Support

Concurrently, a potential de-escalation in geopolitical tensions, specifically regarding the Strait of Hormuz, is providing a broader tailwind for risk-sensitive assets. Reports suggest that a 60-day shipping arrangement involving the U.S. Iran, and Oman may be imminent. President Trump has indicated that an agreement could be reached very soon. The prospect of a calmer geopolitical environment has eased concerns about inflation and prompted traders to scale back expectations for aggressive Federal Reserve interest rate hikes, a scenario generally supportive for industrial metals like copper.

Supply Chain Disruptions Hit Critical Production Stages

Despite the optimism surrounding Hormuz, the immediate impact of its prolonged closure has already inflicted significant damage on crucial segments of the copper supply chain. The disruption to maritime traffic through the strait has curtailed approximately half of the seaborne sulfur shipments originating from the Persian Gulf. Coupled with China’s ongoing export restrictions on sulfur, which are in effect until December, global availability of sulfuric acid has been reduced by roughly a quarter. This is particularly critical because sulfuric acid is an indispensable input for the solvent extraction-electrowinning (SX-EW) process, which accounts for over 15% of global copper production.

Major copper-producing nations are feeling the pinch. The Democratic Republic of Congo, a significant SX-EW producer with annual output around 1.5 million tonnes, and Chile, with a similar output, are reportedly facing dwindling acid inventories, with some operations holding only 30 to 60 days of supply. This precarious situation poses a substantial risk to future production levels.

Adding to supply concerns, Codelco, Chile's state-owned mining giant, has temporarily halted the Andes Norte expansion at its El Teniente mine. This decision followed the identification of an unusual seismic event. The mine, already operating below its historical capacity following a fatal rock burst incident last year, faces continued production constraints. Chairman Bernardo Fontaine has expressed skepticism about the company's ability to achieve its ambitious 1.7 million tonne annual production target within the next four to five years, signaling persistent challenges for one of the world's largest copper producers.

Miner Earnings Reflect Strong Market Conditions

The robust copper market is clearly benefiting mining companies. Glencore reported a substantial 86% surge in adjusted EBITDA for the first half of the year, reaching $10.1 billion. This impressive performance was driven by strong trading profits and a 15% increase in copper output. The company reaffirmed its target of achieving 1 million tonnes of annualized copper production by the end of 2028 and confirmed plans for a secondary listing in Sydney this October, with its U.S.-listed shares seeing a 3% rise.

Other major players also saw positive movement. Anglo American’s shares climbed 1.7% in New York, anticipating the completion of its significant merger with Teck Resources. Antofagasta continued its upward trajectory after a notable rally the previous day. Companies like BHP and Rio Tinto, increasingly focusing on copper as iron ore demand softens, also experienced gains, though BHP has cautioned about potential reductions in its Chilean output next year. A broad spectrum of copper-focused equities, including Freeport-McMoRan, First Quantum Minerals, Ivanhoe Mines, Southern Copper, and Teck Resources, all posted gains, reflecting the widespread optimism surrounding the metal.

Reading Between the Lines

The current surge in copper prices is a complex interplay of speculative positioning, tangible supply constraints, and evolving geopolitical factors. While the looming U.S. tariffs are acting as a powerful catalyst for immediate demand and inventory build-up, the deeper concern lies in the structural supply deficits exacerbated by events like the Strait of Hormuz closure and China's export policies. These disruptions to sulfuric acid, a key enabler of SX-EW copper production, directly impact major producers in the DRC and Chile, suggesting that current supply levels may be unsustainable.

The market's reaction to the potential reopening of the Strait of Hormuz is also telling. The immediate lift in risk assets and softening of inflation expectations demonstrate the sensitivity of global markets to supply chain stability. However, the copper market’s resilience, demonstrated by its record highs despite broader risk-on sentiment, points to a fundamental tightness. Traders should monitor the progress of the U.S. tariff decision, as any imposition could further entrench domestic hoarding, while ongoing supply chain vulnerabilities, particularly regarding sulfuric acid, represent a critical risk factor for production continuity in key mining regions like Chile and the DRC. The performance of copper equities, especially those with significant SX-EW operations, will be a key indicator of underlying supply pressures.

The connection between copper and broader market sentiment is evident. As growth-sensitive metals react to inflation and interest rate expectations, copper's independent strength suggests a powerful supply-side narrative. Investors and traders should closely watch the U.S. Dollar Index (DXY), as a stronger dollar can sometimes pressure dollar-denominated commodities, though current copper dynamics appear to be overriding this effect. Additionally, the performance of energy markets, particularly crude oil, is relevant given the geopolitical links and the potential impact on inflation expectations which, in turn, influence central bank policy and demand for industrial metals. Finally, the equity performance of major diversified miners like BHP and Rio Tinto, as they pivot towards copper, provides a barometer for institutional sentiment towards the metal's long-term prospects.