Copper Supply Disparities Grow as More Shipments Head to the US

The surge in demand for physical copper in America ahead of potential import duties is creating supply shortages in other parts of the world. Latest figures show that stocks on the London Metal Exchange have dropped to new lows as inventory continues to shrink. 

This trend is expected to persist until the Trump administration makes a decision on whether to include the red metal on its list of metals subject to import duties under the Section 232 investigation. At present, U.S. copper futures contracts on the Chicago Mercantile Exchange (CME) continue to trade at significantly higher prices than copper in London. 

While the price gap has been unstable, it currently stands at around $1000 per metric ton for 3-month delivery, which suggests that traders are factoring in a 10% import tariff. 

The price difference between the U.S. and London markets also exceeds the cost of shipping the red metal, reinforcing the incentive for suppliers to divert shipments to the American market. This tariff-driven trade is likely to continue in the near term. The shift is evident in recent trade data as American imports of refined copper surpassed 200,000 tons in April alone. 

In the first 4 months of this year, the U.S. imported 455,000 tons, which is more than twice the volume imported over the same period last year. 

Chilean producers accounted for 61% and 75% of refined copper imported into the country in March and April respectively. This dominance is unsurprising, as 19 Chilean brands are listed on the Chicago Mercantile Exchange’s good-delivery list. 

By the end of May, LME warehouse stocks of Chilean copper had dropped to 75 tons, which is quite a decrease from the 25,150 tons held at the end of last year. In contrast, inventories at the CME rose to 175,954 tons over the same period. 

Live LME stock now stands at 50,850 tons, mostly made up of Chinese and Russian brands. 

While copper from Chile is preferred, the threat of U.S. tariffs has prompted countries like Spain, Australia, South Korea, Germany and Belgium to redirect shipments to the American market. Chinese trade data also shows that nearly 50,000 tons of copper were shipped to America recently. 

Until the tariff situation is resolved, regional supply imbalances will likely continue to grow. In the meantime, the U.S. is stockpiling copper during the Section 232 review process. This means that once a decision is made, it may not need to import significant volumes for several months, potentially reducing any tariff-related revenue for the U.S. Treasury. 

The copper supply crunch in other markets around the world could be a tailwind that drives even more investors towards companies like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) that have properties with proven and unproven copper deposits. 

NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF 

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