Copper Prices Rally Despite Fed Rate Hike as Traders Rush Shipments to US on Tariff Fears

A wave of speculative buying driven by "potential tariffs" is sweeping through the copper market: massive vessels loaded with hundreds of millions of dollars worth of refined copper are heading to the United States at an unprecedented pace.

Copper prices remain strong despite high interest rates. On Monday during European trading, copper prices rose nearly 1%. As of last Friday, copper had posted gains in 11 of the past 12 weeks.

What makes this rally particularly unusual is the lack of supportive monetary conditions. The Federal Reserve raised interest rates last week and signaled a more hawkish policy stance. A stronger U.S. dollar and expectations of another rate hike later this year typically weigh on industrial metals, yet copper remains near record highs.

Tariff Expectations Drive Copper Stockpiles Toward the U.S.

A key driver behind copper's rally is the prospect of U.S. tariffs. The Trump administration is evaluating whether to extend existing copper tariffs to include refined copper. In anticipation, traders and producers have significantly increased shipments to the U.S. to beat any policy changes, drawing large volumes of available copper inventory toward American shores.

Last Friday, a bulk carrier bound for New Orleans was loaded with approximately $500 million worth of African copper — the highest-value single cargo shipment of a commodity ever recorded by Kpler.

New Orleans serves as a key gateway for Comex copper warehouses operated by the Chicago Mercantile Exchange (CME), and local storage capacity is nearing saturation. According to sources, approximately 100,000 tonnes of copper from Africa and South America are scheduled to arrive in September and October. Stockpiles accumulated in anticipation of potential tariffs continue to flow into U.S. port systems.

U.S. storage infrastructure is also expanding rapidly. The CME reports that 20 new copper warehouses have been added since the beginning of 2025, increasing capacity by nearly 725,000 short tons — equivalent to roughly 39% of annual U.S. refined copper consumption.

This has created an unusual situation: rising U.S. inventories have not alleviated global price pressures. The reason is that these stockpiles are not the result of weak demand and passive accumulation, but rather active pre-positioning driven by policy expectations. As a result, copper available for other regions has actually been reduced.

Arbitrage Window Is Narrowing

The price gap between U.S. and international copper markets had previously offered lucrative profits for cross-market shipments. According to Bloomberg, a key arbitrage indicator currently stands at approximately $169 per tonne, well below this year's high of $789. The economic incentive to continue shipping to the U.S. is diminishing.

Growing uncertainty over whether the U.S. will ultimately impose tariffs on refined copper is a major factor behind the narrowing spread. The U.S. government has yet to make a final decision, prompting some market participants to reassess their inventory and shipping strategies built on tariff expectations.

If shipping patterns shift, the inventory map will also be redrawn. Bloomberg notes that some copper not yet in transit may be redirected to Asia, but rerouting cargo already at sea is costly. U.S. ports and warehouses are still absorbing the large volumes of incoming shipments.

Ryan McKay, Senior Commodity Strategist at TD Securities, believes that the mere prospect of tariffs has already produced effects similar to actual tariffs: a significant amount of supply has been drawn to the U.S., while domestic copper premiums have risen, providing stronger price support for local projects.

High Interest Rates Still Fail to Ease Physical Tightness

Monday's market performance shows that tight physical supply remains a key support for copper prices.

Last Thursday, the Fed's policy signals briefly strengthened the U.S. dollar, but copper prices only experienced a minor correction. Sam Crittenden, an analyst at RBC Capital Markets, noted that while fading tariff speculation could create short-term price pressure, the fundamental outlook remains supportive.

Data centers, renewable energy facilities, and disruptions in mine supply continue to be key variables on both the demand and supply sides of the copper market. As long as these factors continue to support the physical market, tariff-driven inventory shifts may further amplify regional spot price differentials.