Copper futures in the United States climbed to approximately $5.1 per pound on Tuesday, marking the highest level in three months. This increase is attributed to the strained supply in major exchanges, which amplified the effects of a weakened dollar. The potential imposition of tariffs on copper by President Trump prompted traders to shift metal between exchanges, consequently leading to supply constraints in critical storage locations. The United States continued its investigation into copper imports, hinting at possible future tariffs that would further limit foreign supply and intensify the pressure on the already constrained smelting and processing capabilities.
As traders removed copper from London Metal Exchange (LME) warehouses, an intense backwardation in the futures curve emerged, causing on-warrant inventory levels to plummet by 80% this year and driving tom/next spreads up to $40 per tonne. Meanwhile, alleviated concerns over reciprocal tariffs by the US, reduced geopolitical tensions in the Middle East, along with anticipated stimulus measures by the Chinese government and monetary easing by the Federal Reserve, collectively contributed to a weaker dollar. This environment fostered a more optimistic outlook for global manufacturing demand.
