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Comex premium slashed by Trump's diluted copper tariffs

After President Donald Trump shocked the markets by reducing tariffs, the once-mighty premium that U.S. Copper enjoyed over global benchmarks swung into a discount.

Trump announced on Wednesday that the United States will impose a tariff of 50% on copper pipes, wiring and other copper products. However, the measure fell short and excluded copper materials like ores, concentrates, and cathodes.

The unexpected move brought down U.S. Copper prices by more than 20 percent on the Comex exchange, and slashed the premium that had been growing over the London benchmark in recent weeks. Shipments were diverted to the U.S. because they expected higher prices at home.

Anant Jatia is the founder and chief investment office of Greenland Investment Management a hedge-fund that specialises in commodity arbitrage trading.

Over time, Comex returns to a premium due to the decline in inventories and the continued U.S. premium."

U.S. Comex September copper futures last fell 22% on Thursday to $4.359 per lb, or $9,610 for a metric ton, a $20 discount over LME.

The premium last week was $3,000 Benchmark LME Copper fell by 0.7%, to $9.630 per ton.

What happens to the U.S. Inventions

Since Trump's first warning about tariffs, in February, months of high premiums have sucked up huge volumes of copper around the globe.

Even a few short weeks ago, traders still redirected cargoes towards the United States to avoid the new tariffs.

Trump's sudden pivot raises the possibility that some of this stockpile could be re-exported. Macquarie estimated in early October that it would take nine full months of normal consumption to exhaust the stocks built up during the first half year.

Goldman Sachs stated in a Thursday note that Trump's potential threat to impose tariffs in 2027 on refined copper would keep U.S. prices and global prices close to parity, and limit large-scale re-exporting.

Trump teased his tariff for the first time in early July. He implied that the tariff would be applied to all types red metals, from cathodes made by mines and furnaces to wire and other products.

In a proclamation issued by the White House however, the administration stated that the tariff would only apply to products where copper is heavily utilized, such as cable and electrical components. Reporting by Lewis Jackson, Polina Devlin and Eric Onstad, London, and Hongmei LI, Singapore; Additional reporting from Pratima Dasai, London; Editing and production by Christopher Cushing and Michael Perry; Lincoln Feast, Kate Mayberry and Kate Mayberry.

(source: Reuters)