Key Takeaways:
COMEX copper's premium over London metal prices implies a 37% chance of a 30% U.S. tariff by January 2028, Societe Generale estimates.
The spread between U.S. COMEX futures and London Metal Exchange prices has become a real-time gauge of tariff risk, with a wider premium reflecting greater perceived odds of further duties, Ewa Manthey, commodities strategist at ING, said.
The U.S. imported more than 200,000 metric tons of copper in July, the highest level in 12 years, as traders position ahead of a White House decision on additional levies. The Commerce Department has recommended a phased universal tariff of 15% on refined copper from Jan. 1, 2027, rising to 30% on Jan. 1, 2028, on top of an existing 50% duty on semi-finished copper products.
Copper, a barometer for the broader economy used in construction, electronics and transportation, has rallied for more than a year, with futures reaching a record near $6.90 per pound last week. Natalie Scott-Gray, senior metals demand strategist at StoneX, called the pending Section 232 decision the single biggest driver facing the copper market.
SocGen analysts led by Mike Haigh, head of FIC and commodity research, model the gap by comparing COMEX futures with the full delivered cost of moving LME-grade copper from European warehouses to the U.S. East Coast. Over 28 years, the spread has shown a persistent bias toward a COMEX premium of about $33 per metric ton, with dislocations decaying with a half-life near 3.5 days, according to the bank.
Because tariff expectations sit in the premium of COMEX over the fully delivered LME cost rather than in the raw exchange spread, the residual reflects the expected tariff contribution. Applying that framework across matched futures maturities, SocGen estimates the market is pricing a 14.6% chance of a 15% tariff by January 2027 and a 37% chance of a 30% duty by January 2028.
The widening premium has drawn metal into the U.S., with July imports topping 200,000 metric tons, the highest in 12 years. Manthey said the wider spread remains supportive for copper prices near term as mine supply stays tight and competition between the U.S. and China for available metal intensifies.
Copper at $6.90 per pound sits well above its long-run average, reflecting demand from AI infrastructure, grid modernization and defense spending. Scott-Gray said broad tariffs would squeeze supply outside the U.S., while no tariffs would unwind the COMEX-LME arbitrage. Manthey said the outlook for copper remains constructive, although tariff uncertainty is likely to keep volatility elevated.
This article is for informational purposes only and does not constitute investment advice.
