Copper Market in Asia Tightens Amid U.S. Tariff Speculation

The copper market in Asia is experiencing significant tightening as speculation grows over potential U.S. import tariffs on the industrial metal. This has led to a surge in copper prices, with New York futures rallying far more than the global benchmark on the London Metal Exchange (LME), creating an unusual price dislocation. The Yangshan premium, a key indicator of the cost of shipping refined copper into China, has nearly doubled this month, while Southeast Asia's import premiums have reached their highest levels since April 2024.

The tightening supply is partly due to cargoes from South America and Congo being diverted to the U.S., as traders rush to ship copper ahead of potential tariffs. This shift has reduced imports into China, which fell 11% in the first two months of 2025, while Chinese exports more than doubled due to higher global prices opening a rare arbitrage window. Analysts predict that imports could drop by as much as one-third for April and May compared to last year.

Domestically, China's copper market is showing signs of strain. The premium for cathode copper in Guangdong province recently spiked to over 200 yuan ($28) per ton, the highest seasonal level since at least 2020. This increase follows a surge in exports from smelters in southern China, further tightening local supply.

Despite the rally, demand destruction is becoming evident as Chinese fabricators resist purchasing copper priced above 80,000 yuan per ton ($11,288 per metric ton). However, demand from grid operators remains robust, supported by increased investment in China's electricity networks, which jumped 33% year-on-year to 43.6 billion yuan ($6 billion) in the first two months of 2025.

Global factors are also contributing to the tightening market. Copper prices recently surpassed $10,000 per metric ton on the LME as traders anticipate further supply constraints due to underinvestment in mining and refining capacity worldwide. Analysts estimate that global demand for copper could outstrip supply by 320,000 tonnes this year alone.

As tensions surrounding U.S. trade policies and global supply constraints persist, the copper market remains volatile. The potential imposition of U.S. tariffs could further disrupt trade flows and exacerbate shortages in key consuming regions like Asia.