U.S. copper consumption accounts for about 6% to 7% of the global total, but the copper inventory held by the New York Commodity Exchange (COMEX) is close to 70% of the combined total of the world's three major futures exchanges. Ole Hansen, head of commodity strategy at Saxo Bank, said this proportion is unprecedented.
The direct driver is tariff risk. The U.S. Department of Commerce has proposed phased tariffs on imported refined copper: 15% in 2027, rising to 30% in 2028. The U.S. government has already exceeded its self-imposed deadline by over seven weeks and has yet to make a decision. Traders are no longer waiting because the calculation is simple: get copper into the U.S. before the tariffs take effect. Once they do, the value of the copper will rise. Hansen said, "If you can get your hands on copper, you'll want it on U.S. soil in case tariffs are imposed, because that means its value will increase."
Another pull factor comes from Asia. Hansen stated that demand in China has picked up. China is at the forefront of the energy transition, and copper demand remains strong despite the downturn in the real estate market.
Hansen acknowledged that the copper hoarded in the U.S. could ultimately flow back out. If prices outside the U.S. rise high enough and the arbitrage direction flips, the metal would flow out again. However, a large amount of copper rushed into the U.S. ahead of the announcement last year, and the announcement was subsequently delayed. In the following months, almost no copper left. "There is a risk that all the copper being shipped into the U.S. is becoming stranded metal, which will keep the rest of the world's supply tight," Hansen said.
London Metal Exchange (LME) inventory data on Monday showed total copper stocks of 207,825 tonnes, of which 104,750 tonnes have been cancelled, with about 63% of that located in U.S. warehouses. The spot premium for copper over the three-month contract reached $535 per tonne, the widest since 2021. Hansen believes this reflects more short-covering than an actual shortage. "Large players have long been out of the market, and the premium might be driven by relatively small tonnages." When the spread reached similar levels in 2021, the LME intervened urgently. Hansen expects that won't happen this time. "Copper is a global benchmark," he said.
The supply side is not optimistic either. BHP's report shows that copper revenue accounts for more than half of the company's total revenue for the first time in history, but production from its Chilean operations has declined due to falling ore grades. The Chilean Copper Commission (Cochilco) expects the country's copper production to fall by 2.6% this year.
Hansen explained that the problem lies in slow execution: it takes many years from discovery to first metal. Mining companies have focused on consolidation rather than expansion in recent years, ore grades are declining, and energy and steel costs are rising. BHP's CEO provided the replacement cost: $16,000 to $30,000 per tonne for a new copper mine, and well over $100,000 per tonne to acquire a company with an existing copper mine.
With the supply side unable to respond quickly, the extreme concentration of U.S. inventories may continue to keep supplies tight for the rest of the world.
