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Trafigura, Mercuria, Glencore and IXM could reap bumper profits of more than $300mn after shipping record amounts of copper into the US ahead of tariffs on the metal.
The commodity traders are at the forefront of a trend in which huge quantities of copper are being brought to the US, where a widening price gap with the international benchmark has created a lucrative arbitrage opportunity.
US copper prices surged 13 per cent within minutes of President Donald Trump’s announcement on Tuesday that the US would levy 50 per cent tariffs on copper, twice the expected level, from August 1.
They are now about 28 per cent higher than on the London Metal Exchange, making the traders’ punt — in essence buying at the LME price, shipping to the US and selling at the US Comex price — one of the most profitable metals trades in recent decades.
While analysts question the impact copper tariffs will have on US manufacturers, commodity trading firms have emerged as the clear corporate winners.
A huge copper stockpile has built up in the US this year after trading houses shipped in large quantities as the arbitrage opportunity opened.
Trafigura, Mercuria, Glencore and IXM have brought in about 600,000 tonnes of “excess” copper that is surplus to normal demand since the election in November, according to market insiders.
“Months ago, copper traders worldwide took a punt that Trump’s tariff pitch for their market was real, not bluster. They were right, and their collective pay-off has been spectacular,” said Tom Price, analyst at Panmure Liberum.
“Because so much metal has been sent to the US, you have sucked dry the rest of the world’s copper market,” said one trader.
While exact profits vary widely depending on the structure of the trade, a conservative back-of-the-envelope calculation shows that the four firms’ collective 600,000 tonnes would yield profits of $312mn.
Taking the average differential between the LME and Comex prices since February, when US copper imports picked up, and subtracting an estimated total cost of $500 per tonne, yields a profit of about $520 per tonne, according to FT calculations and information from market participants.
Trafigura, normally the largest copper supplier to the US, has brought in about 200,000 tonnes, according to market participants. Meanwhile Switzerland-based Mercuria will have brought in nearly 200,000 tonnes by the end of the month, according to people with knowledge of the matter.
Glencore, which produces its own copper as well as trading the metal, has brought in between 100,000 and 200,000 tonnes, while IXM has brought in more than 50,000 tonnes.
The stockpile of copper amassed in the US is only the most recent commodity market ruction created by Trump’s tariff policies, after gold and aluminium went through similar build-ups earlier this year.
One of the most vocal advocates of the trading opportunity has been Mercuria, which has rapidly expanded its metals desk over the past two years.
Kostas Bintas, Mercuria’s head of metals, told the Financial Times in March that “copper is going through one of the most exceptional periods in history today” because of the unusual inflows into the US market.
Trafigura, Glencore, Mercuria and IXM declined to comment.
Additional reporting by Keith Fray and Clara Murray
https://www.ft.com/content/abef0e1c-d306-48ed-9d7a-0ba29bc07496
