01 THE SETUP

Another week, another leg up. September COMEX copper hit a record $6.7140/lb on August 12. LME cash shot past the $14,500/tonne mark, trading as high as a $545 premium over the three-month contract. LME stocks fell for 42 straight days, the longest run since 2014 (the streak ended August 17 when LME stocks rose from 204,975t to 207,825t, then to 223,550 yesterday).

And the key driver is still the same one we’ve seen for the last 18 months: a still-unmade U.S. tariff decision.

02 WHY IT MATTERS

If we strip the tariff trade to its logic, it’s a policy-premium play: buy metal now, hold it inside the U.S., and if the tariff lands your copper is instantly worth world-price-plus-tariff. And the ex-U.S. squeeze is largely a by-product of that: warehousing metal in the U.S. depletes the pool from which everyone else can draw from.

That sets up a question: if hoarding to capture the premium is distorting copper prices, at what point does the distortion grow larger than the premium it’s chasing?

03 THE DECODE

The two quantities that matter here are the prize (world price + tariff rate), and the froth (how far hoarding has pushed copper above what fundamentals justify). If the froth exceeds the prize, the trade becomes self-defeating if a decision prompts a bigger correction than the payoff it was built to collect.

So how much froth is there?

Starting with fundamentals, there’s a simple case to make for there being significant froth. While mine supply has genuinely disappointed — 2025 growth came in at 0.9% against 3.5% expected, then Grasberg, Kamoa and El Teniente — mine trouble hasn’t reached the refined market. ICSG’s actuals for the first five months of 2026 show a refined surplus of ~221,000 tonnes, nearly double the ~117,000 tonnes a year earlier as refined output grew ~3% even while mine output fell 1.9%. And despite the squeeze, combined exchange inventories across LME, SHFE, and COMEX crossed the 1-million-tonne mark, their highest levels since May 2003. In short, we have record stocks plus a widening surplus all happening simultaneously with record prices.

However, we can also make the case that market distortion has contaminated the fundamentals. For instance, copper this expensive is arguably suppressing demand — Chinese buyers have pulled back at elevated prices and the Yangshan import premium has fallen to $28-38/tonne from $115 last month. So some of today’s apparent oversupply is potentially just demand that temporarily walked away, not metal that was always going spare.

Looking back.

Either way, a useful starting point might be to look backward instead — to the last read on where copper was headed before tariff-hoarding severely distorted the price. The trick here is to pick a moment late enough to already contain any bad supply news, but early enough to avoid today’s severely distorted market.

October 2025 may be a good starting point — major supply disappointments were already visible (Grasberg, Kamoa-Kakula and El Teniente were known problems), and supply forecasts had already been revised sharply lower.

With all of that priced in, the analyst consensus for 2026 was about $10,500/tonne, Goldman sat at $10,000-11,000, and even bullish Bank of America was at ~$11,300 for 2026. Call the disruption-inclusive, distortion-excluded baseline $10,500-12,000.

Sizing the froth.

Three-month copper today is roughly $14,300 — a roughly 19-36% premium above where the market, just 10 months ago, thought copper belonged in 2026-27. Assuming no substantial changes at a fundamental level since then, we could argue that the froth is reaching a point where it might exceed any potential prize — 15% in 2027; 30% in 2028. Even more so once we factor risk into the equation — Societe Generale recently estimated that the current LME-COMEX premium implies a 14.6% chance of a 15% tariff in January 2027, and a 37% chance of 30% by January 2028.

So the question is, will post-decision copper prices hold up enough to justify hoarding at today’s prices?

Either way, a correction of some sort is probably due when a decision eventually hits:

The confirmation scenario isn’t a fringe theory, either. When the 50% tariff was confirmed in July 2025, copper prices immediately dropped, and Goldman cut its near-term LME forecast to $9,550 from $10,050, because “the risk of an ex-US copper shortage has been reduced” and inflows would “slow substantially once the tariff is implemented, bringing an end to the ex-US tightening.”

Tellingly, while Goldman had raised its 2026 average price forecast by the time December rolled around on the back of the tariff story (from $10,650 to $11,400), it left its 2027 average untouched at $10,750, explicitly expecting LME prices to retreat once tariffs are enacted and global flows rebalance.

And today’s more bullish forecasts don’t negate such a rebalance, either. While Goldman has since raised its 2026 forecast to $13,735 per tonne, it specifically cited stronger-than-expected imports into the United States and widening ex-US deficits — the exact forces a decision unwinds.

Is the tariff trade still smart?

Assuming a post-decision correction and no drastic changes to copper’s fundamentals, copper may be reaching a point where the tariff trade is becoming increasingly harder to justify. If copper eventually mean-reverts anywhere near the late-2025 consensus, paying a steep premium over what fundamentals might support today in order to capture a 15% premium over world price next year (or 30% in 2028) starts to look questionable. Particularly once additional rejection risk and a post-decision correction are factored into the equation.

Of course, none of that is immediately bearish — arguably, the current ambiguity around the tariff decision is the most bullish thing to happen all year. And while there is an apparent surplus, at only 221kt, falling prices could see that surplus snapped up quickly. With that said, if the tariff trade is indeed reaching its limit, there’s a chance the current intensity of the copper squeeze may begin to ease.

04 WHAT TO WATCH
 
Froth deflating. Backwardation deflating or stocks turning up means the pump is slowing and the premium is bleeding — regardless of any tariff decision.

Confirm / reject / delay. Rejection dumps trapped metal into surplus and hits U.S.-premium holders hardest. Confirmation halts the drain and pulls the world price down under a lower base. Only continued “further study” keeps the position whole.

Whether the surplus widens. Grasberg and Kamoa recovery through H2 adds supply to an already-surplus market. Watch whether second-half demand absorbs it or the surplus grows.

China, not Washington. The Yangshan premium and Chinese fabricator activity are the leading signal for whether the forecast deficit materializes — or whether the current price kills it first.

/ Korea taps Glencore for copper supply with $1B loan deal

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/ BHP: Economic and commodity outlook

BHP says China plans roughly RMB5 trillion of power-infrastructure investment during 2026–30, up about 80% from the previous five-year plan, while forecasts put cumulative U.S. grid/utility capex over the next five years a

That’s the wire for today. Until next week, remember that good trades can expire.

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