The copper market is facing turbulence as a significant price gap develops between the Comex copper prices exchange in the U.S. and both the London Metal Exchange (LME) and the Shanghai exchanges. This price discrepancy is leading to increased arbitrage activity. It also creates challenges for traders, particularly in the recycled metal sector.

Comex-LME Price Gap Reaches Record Levels

By February 10, 2025, the price premium of copper futures on the Comex exchange reached a record high of $920 per metric ton over the LME prices. This is a substantial jump from the $558 per metric ton spread observed the week prior. Such a large gap has sparked opportunities for arbitrage. Traders are buying copper at the lower LME prices and selling it at the higher Comex price. The discrepancy is also linked to market speculation about potential U.S. copper tariffs. These speculations have contributed to the price divergence.

While the U.S. has imposed tariffs on steel and aluminum imports, no official tariff measures have been announced for copper. However, the possibility of tariffs on copper remains a topic of discussion. This further fuels the price discrepancy between the U.S. and international exchanges.

The Impact on Recycled Metal Traders

The widening gap between the Comex and LME prices has placed recycled copper traders in a difficult position. U.S. companies that export recycled copper find it increasingly challenging to convince overseas buyers to pay higher Comex-based prices. This is because they can purchase copper on the LME at a lower rate. The issue is especially problematic for scrap processors who rely on industrial customers. These customers expect copper prices to reflect the higher Comex values. However, overseas buyers are pushing for LME-based pricing to benefit from the lower cost.

This situation is putting additional pressure on U.S. companies, particularly those that rely on hedging strategies to protect inventory values. John Gross, a New York-based analyst, warned that this pricing disparity is reminiscent of the volatility seen in 2006. In 2006, copper prices surged on Comex before the arbitrage opportunity reversed and LME prices regained their strength. Companies are now facing increased financial strain. Many are struggling to meet margin calls and adjust to the pricing pressures.

Navigating Uncertainty in Global Copper Markets

As the price gap between Comex and the LME persists, U.S. exporters are likely to face continued challenges in maintaining competitiveness in the global copper market. The uncertainty surrounding potential tariffs and ongoing market volatility only adds to the complexity of navigating these price discrepancies. As recycled metal traders continue to grapple with these issues, the outlook for copper prices in the coming months remains uncertain.

The ongoing situation highlights the delicate balance in global copper markets. Here, price shifts can have significant ripple effects on both industrial customers and international traders.