Copper Prices Hold Near Five-Month Highs Amid Tariff Speculation and Supply Squeeze

Copper opened at $5.1175 per pound on March 31, marking a 31% year-to-date gain despite a 0.24% dip from Friday’s close.

Volatility dominated overnight trading as prices swung between $5.0845 and $5.146, driven by algorithmic responses to U.S. tariff rumors and accelerating Chinese export activity.

Trading volumes spiked to 7,403 contracts—seven times the daily average—as institutional players repositioned ahead of anticipated Commerce Department policy announcements.

Weekend sessions saw copper briefly touch $5.116 early Monday before retreating, reflecting profit-taking after a sustained rally. Market makers attributed the pressure to Shanghai’s backwardation.

In this situation, April contracts traded at 81,900 yuan ($11,277.88/tonne) against September futures. Simultaneously, a $1,400-per-tonne COMEX-LME arbitrage gap diverted global metal stocks toward U.S. warehouses, tightening European and Asian supplies.

The LME reported 4,125 tonnes of withdrawals overnight, while Shanghai inventories fell 13.9% year-over-year to 333,600 tonnes. Gold’s parallel surge to $3,065 per ounce amplified cross-market tensions, drawing capital into safe havens while copper’s industrial fundamentals faced stress tests.

Copper Faces Pressure

Analysts noted gold-backed ETFs absorbed 107.5 tonnes of inflows this year, contrasting with copper-focused funds like COPP, which saw a 1.83% daily NAV drop despite holding $24.7 million in assets.

The divergence highlighted investor caution toward industrial metals amid geopolitical friction, though copper’s structural supply deficit—projected at 320,000 tonnes for 2025—anchored long-term bullish sentiment.

Tariff uncertainties dominated trader discussions as the U.S. weighed expediting 25% import duties. “The market’s tightness predates tariffs, but stockpiling has intensified,” said Mercuria’s Kostas Bintas, referencing 500,000 tonnes of copper recently redirected to American storage.

Chinese refined copper exports surged 119% year-over-year, compounding delivery delays at Rotterdam and Busan ports. Goldman Sachs analysts warned COMEX premiums could persist through June unless logistical bottlenecks ease.

Technical charts signaled caution as copper’s RSI hit 72.47 before cooling to 68.3, paired with a bearish MACD divergence. Immediate support held at $5.0845, the session’s low, while resistance loomed at March’s $5.3740 record.

NinjaTrader strategists identified $5.1565 as a near-term Fibonacci target, though open interest’s 22% monthly gain suggested leveraged positioning might amplify corrections.

ETF flows revealed split priorities: SPDR Gold added 32 tonnes Monday as institutions hedged, while COPP traded at a 0.14% premium despite net outflows.

The dollar index’s rebound pressured metals broadly, though copper’s electrification narrative stayed intact. Each electric vehicle requires 183 pounds of copper—triple traditional engines—a fact buoying miners even as tariffs reshape trade lanes.

Market watchers now monitor LME-Shanghai arbitrage rates, stagnant at $1,277 per tonne, for signs of Asian demand revival. With U.S. stockpiling accelerating and Chinese smelters prioritizing exports, copper’s price path hinges on whether supply deficits outpace tariff disruptions.

The metal’s 2025 story remains bullish, but Monday’s pullback underscored how policy shocks could temper its climb.

Related coverage: Brent Oil Nears $73 as OPEC+ Prepares to Ease Production Cuts – March 31 · Gold Hits Record $3,118 as Geopolitical Tensions and Economic Fears Drive Safe-Haven Demand · Brazilian Real Holds Ground Against Dollar on April 1, 2025 · Oil Prices Teeter as Supply Fears Clash with Demand Woes

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