LME Copper Diverges Sharply From COMEX as Tariff Hoarding Drains Deliverable Metal

The copper market is telling two completely different stories depending on which side of the Atlantic you're standing on. In the United States, COMEX warehouses are bulging with over 800,000 tonnes of copper — a record build driven by tariff-hedging that has seen traders ship metal from every available origin into US custody. In the rest of the world, deliverable copper is vanishing. LME warehouse stocks have fallen 65% since May to 107,850 tonnes as of July 23, their lowest level in seven months. SHFE inventories are down 82% from their May peak. The numbers are not subtle: copper is abundant where tariffs might hit, and scarce everywhere else.

The mechanism is straightforward but the consequences are far-reaching. Since late 2024, the threat of US tariffs on copper imports — first floated at 10%, then escalated to 25% in policy discussions — has created a massive arbitrage incentive. Traders can buy copper at LME prices, ship it to COMEX warehouses, and capture the premium that US buyers will pay to secure pre-tariff metal. Goldman Sachs estimates that over 500,000 tonnes have been redirected into COMEX storage since the fourth quarter of 2025. The International Copper Study Group (ICSG) noted in its June 2026 bulletin that the US imported 38% more refined copper in the first five months of 2026 than the same period in 2025 — all of it flowing into warehouse inventories rather than consumption.

This hoarding behavior has drained metal from Asia in particular. Chinese refined copper imports fell 14.3% year-on-year in H1 2026 to 1.41 million tonnes, despite a Q2 rebound that saw June imports hit a nine-month high. The decline is not a demand story — Chinese apparent consumption has held steady — but a supply story. SHFE warehouses that held over 600,000 tonnes in May now hold barely 120,000 tonnes. Chinese smelters, already squeezed by treatment and refining charges (TC/RCs) near zero on spot concentrate purchases, are running maintenance shutdowns earlier and longer than usual. The combination of reduced domestic smelter output and redirected imports has created genuine tightness in the world's largest copper consumer.

On the supply side, the concentrate market remains historically stressed. Spot TC/RCs for clean copper concentrate delivered to China hover at $0-5 per dry metric tonne — effectively zero after processing costs. The annual benchmark for 2026, settled between Chilean miner Antofagasta and Chinese smelters, was reported at approximately $20/dmt, down from $80/dmt in 2024. This collapse in treatment charges reflects a deeper structural problem: mine supply growth has consistently disappointed. Codelco, the world's largest copper producer, saw production fall to 1.24 million tonnes in 2025, the lowest in a quarter century, though its 2026 guidance of 1.35-1.40 million tonnes suggests a modest recovery. First Quantum's Cobre Panama mine remains idled following the 2024 constitutional court ruling, removing approximately 350,000 tonnes per year of mine supply. Anglo American reduced its 2026 production guidance by 6% citing geotechnical issues at Los Bronces.

Analyst views on copper's near-term direction diverge sharply, but all agree the market structure is unusual. Citi Research, in a July 18 note, called the COMEX-LME spread 'unsustainable at current levels' and predicted a mean reversion to $200-300/t from the current $400-500/t premium. Their base case has LME copper averaging $13,200/t in H2 2026. Goldman Sachs maintains its 12-month target of $15,000/t, arguing that the ex-US inventory drawdown is the real signal and that COMEX stockpiles are 'unavailable to the global market by definition' until tariff uncertainty resolves. Trafigura, in its mid-year commodities outlook, warned that a sudden tariff resolution could trigger a rapid unwind of COMEX stocks — potentially 200,000-300,000 tonnes of metal flooding back into LME warehouses — but cautioned that the political timeline makes this a 2027 event at the earliest.

China's demand picture is mixed but not collapsing. State Grid Corporation, China's dominant copper consumer through power infrastructure spending, increased its 2026 investment budget by 8% to RMB 680 billion. This is a genuine demand driver: approximately 40% of China's copper consumption goes into the power sector. Electric vehicle production, which uses roughly 3-4 times more copper per unit than internal combustion vehicles, continues to grow — China's EV output rose 18% year-on-year in H1 2026. The offset is property construction, where copper use in wiring, plumbing, and HVAC remains depressed. New housing starts were down 12% in the first half, extending a multi-year decline. The net effect: Chinese copper demand is growing 2-3% annually, not the 5-6% rates of the 2010s, but it is growing.

The forward catalyst calendar is dominated by three dates. First, September 2026: the US Commerce Department's Section 232 investigation into copper imports is expected to deliver its findings, potentially triggering immediate tariff action. If tariffs are imposed, COMEX premiums could spike further, draining more metal from LME and SHFE warehouses. If the investigation concludes without tariffs, the COMEX-LME spread could collapse as traders rush to re-export metal. Second, Q4 2026: Codelco's production recovery trajectory becomes clearer with Q3 results. A miss on their 1.35-1.40Mt guidance would remove the single largest source of expected supply growth. Third, China's Q3 GDP data and any stimulus announcements from the Third Plenum follow-up sessions will determine whether Chinese demand provides a floor or a ceiling for prices.

LME spreads offer the most honest assessment of current conditions. The cash-to-three-month spread moved into backwardation in mid-July, with cash commanding a $15-25/t premium over the three-month contract. This is the market's way of saying metal is needed now, not in October. Canceled warrants — metal earmarked for delivery out of LME warehouses — surged to 48% of total LME inventory in the most recent report, suggesting another wave of stock draws is imminent. Traders who need physical copper today are paying up for it, while COMEX warehouses in Louisiana and Chicago sit on mountains of metal that the global market cannot access without incurring the very tariffs they were stockpiled to avoid.