Copper price nearing US record as premium doubles, Shanghai stockpiles drop 82%

Copper surged to its highest in more than a month on Tuesday as evidence of a tightening physical market in China piled up and traders rebuilt bets that Washington will impose a tariff on refined metal.

Comex copper for September delivery jumped 3.3% to $6.55 a pound ($14,440 a tonne) by early afternoon in New York, less than 2% from the record set in early June. Three-month copper on the LME rose 1.7% to $13,851 a tonne, its best level since June 15, leaving New York metal at a premium of nearly $600 a tonne, more than double Monday’s gap and a sign the market is again pricing in a duty on US imports of refined copper, a decision that now sits with the White House.

The pull is coming from China, where two separate tightness gauges are flashing at once. Inside the country, the premium for spot cathode over Shanghai futures, a measure of how hard prompt metal is to find in the domestic market, jumped to 435 yuan ($61) a tonne, up from zero a week ago and the highest since May last year.

At the border, the Yangshan premium importers pay to bring copper into China climbed to $103 a tonne on Monday, also the highest since May 2025 and up from a $20 low in January, according to Shanghai Metals Market data.

Deliverable copper stocks in warehouses monitored by the Shanghai Futures Exchange have collapsed 82% since early May, while LME inventories are down 28% over the same stretch, and more metal is on its way out: of the 296,625 tonnes in the LME system on Tuesday, 166,025 tonnes, or 56%, sat on cancelled warrants awaiting delivery out, according to exchange data. The LME’s cash-to-three-month spread has narrowed close to backwardation, a sign of tightening near-term availability.

“Copper is being pulled higher by a tightening Chinese market,” ING commodities strategist Ewa Manthey said in a note, adding that the rally will need continued evidence of physical tightness to extend much further.

The squeeze extends into the smelting network. Satellite monitoring by Earth-i’s SAVANT index registered 16% of global copper smelter capacity as inactive in the second quarter, with Chile the standout laggard: inactivity there hit 25.4%, the highest reading since 2019, corroborating a 12.9% year-on-year drop in the country’s copper output in May.

Record-low treatment charges are claiming permanent casualties, with Japan’s 354,000 tonne-a-year Onahama smelter, which showed no operating signals in June, set to stop processing concentrates by early 2027.

Waiting on Washington

The tariff question has kept a floor under the New York premium. The Commerce Department’s update on the US copper market fell due at the end of June, leaving the president to decide whether a phased duty on refined copper, 15% from January 2027 rising to 30% in 2028, goes ahead. Comex warehouses hold a record 630,000-plus tonnes after eight straight quarters of builds, a hoard assembled largely on tariff expectations.

Geopolitics cut both ways on Tuesday. Reports that mediators have proposed a 10-day US-Iran ceasefire cooled oil more than 1% in early trade, supporting risk appetite across industrial metals, with aluminium, zinc, nickel and tin all higher.

Yemen’s Houthis, meanwhile, said they would impose a naval blockade on Saudi Arabia, and a tanker in the Strait of Hormuz was struck by an unknown projectile, keeping alive the sulphur supply threat the IEA warned last week could curtail leached copper production.

Copper equities amplified the move. Southern Copper jumped 6.5% and Freeport-McMoRan 6.3% by early afternoon in New York, with Freeport’s gain for the year now at 23%, two days before the top US-listed producer reports second-quarter results. The rally swept the rest of the majors, with Teck Resources up 3.7%, BHP 3.6%, Glencore 3% and Rio Tinto 2%, while Lundin Mining added 6.7% and First Quantum 5.9%.

Copper is now up about 16% in New York this year and 10% in London.

(With files from Reuters)