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Copper shifts into tariff-driven COMEX-LME arbitrage

Societe Generale estimates the market assigns a 14.6% chance of a 15% refined copper tariff by January 2027 and a 37% chance of a 30% tariff by January 2028.

Reported · Written up by our desk · Energy Transition

Societe Generale analysts Michael Haigh and Jeremy Sellem say copper trading has moved from a primarily technical arbitrage to a policy-driven trade as US Section 232 tariffs reshape the spread between COMEX copper in the United States and LME copper elsewhere.

They point to a structurally wider COMEX premium, renewed physical arbitrage windows, and a mean-reverting spread that has a roughly $33/mt long-run bias. Their framework also reflects that both contracts are physically deliverable, with metal flows tending to move from the cheaper venue to the more expensive one.

The analysts describe how the larger LME warehouse network has historically left LME inventory levels about 65% higher than COMEX. They also say tariff expectations are embedded in the COMEX premium over the fully delivered LME CIF cost rather than the raw exchange spread.

Using their model across matched copper futures maturities, Societe Generale estimates market-implied probabilities of future tariff outcomes, including a 14.6% chance of a 15% tariff by January 2027 and a 37% chance of a 30% tariff by January 2028.

Latest closeCopper $6.711 ▲0.1%

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