The Copper Paradox: US Inventory Surge vs. Global Supply Tightness

As of 7:33 AM WEST on May 21, 2025, copper is trading at $4.7196 per pound on COMEX, showing a slight recovery of 0.42% after yesterday’s session. The metal has regained some momentum after losing 0.30% yesterday when it settled at $4.6195 per pound.

US Market

COMEX copper futures have rebounded this morning after two declining sessions out of the past three. The recovery comes despite significant inventory builds in US warehouses, which reached an eight-year high of 168,563 tons earlier this month.

This substantial increase in domestic copper inventories has significantly reduced the tariff premium that had developed in anticipation of potential import restrictions.

Just three weeks ago, this premium was nearly $1,600 per metric ton (17% of the LME price), but it has since plummeted to around $600 per ton (6%).

Yesterday’s trading saw the July ’25 COMEX contract lose 1.40 cents per pound to settle at $4.6195, marking a 11.44% decline from its 52-week high of $5.216 reached on March 26, 2025. Despite this pullback, copper remains up 15.89% year-to-date.

European Market

The London Metal Exchange (LME) has seen copper inventories decline to a one-year low of 179,375 tons, with approximately 40% of the remaining stock awaiting physical load-out.

This tightening supply situation has shifted the cash-to-three-month spread to a $30-per-ton backwardation, contrasting sharply with the contango seen in US markets.

Asian Market

Chinese copper demand remains robust despite broader economic concerns. The country’s copper imports surged to record levels in April, reaching nearly 3 million tonnes of copper concentrate as smelters sought to secure raw materials amid tight global supply.

This strong demand has contributed to a significant reduction in Shanghai Futures Exchange (SHFE) monitored stockpiles, which have decreased by 67% to just 89,000 tons over the past ten weeks.

Market Drivers

Supply Concerns

The International Copper Study Group recently doubled its forecast for this year’s surplus to nearly 300,000 tonnes, driven by strong ore output from South America. This has raised concerns about a potential glut, prompting foreign traders to close long positions on US copper futures.

Despite the projected surplus, structural supply issues persist. Global copper mine output is projected to reach 23.2 million tonnes in 2025, representing just a 3% increase from 2024 levels.

This modest growth stems from capacity expansions at existing operations and new mine developments in Chile, the Democratic Republic of Congo, and China.

Tariff Uncertainty

The copper market continues to be influenced by uncertainty surrounding potential US tariffs. The White House has recently made moves to strike trade deals with major trading partners, but the probe for the Department of Commerce to place tariffs on copper remains open.

This has led to a redirection of global copper flows, with metal moving back into the United States as factories seek to shield themselves from potential levy risks.

Technical Analysis

Copper prices have lost their negative momentum, which had been pushing the metal into a bearish trading pattern. The price is currently finding support at the $4.50 level, reinforced by the stability of the 55-day moving average.

Market analysts expect trading to remain confined between support at $4.50 and resistance at $4.66, with a breakthrough of either level likely to determine the trend in the near term.

The 50-day moving average is providing resistance around the $4.69 level, while the 200-day moving average offers support near $4.52. Momentum indicators suggest the market remains in a neutral position, with potential for movement in either direction depending on upcoming economic data and trade developments.

Investment Flows

ETF activity shows continued investor interest in the copper sector despite recent price volatility. The Sprott Copper Miners ETF (COPP) closed at $20.26 on May 16, down 1.65% for the session but still showing a 5.57% cumulative increase since inception.

The Global X Copper Miners ETF has climbed 13% in 2025, while the United States Copper Index Fund, the largest copper ETF, has gained an impressive 30% year-to-date, attracting $18.5 million in inflows during a two-week period in March.

Market Outlook

Analysts maintain a cautiously optimistic outlook for copper prices. Goldman Sachs expects copper prices to trade between $5.00 and $5.50 per pound, projecting a deficit of 180,000 tons in 2025 and 250,000 tons in 2026.

The bank also estimates that by Q3 2025, 45-60% of global reported copper inventories could be in the US, which accounts for just 6% of global refined demand—potentially leaving the rest of the world with very low stocks of this important transition metal.

This tightness, albeit a function of trade dislocation, may discourage new short positions driven by trade war-related growth worries from entering the market, thereby potentially limiting the downside to copper prices through the remainder of 2025.

The expected trading range for today is between $4.55 and $4.66 per pound, with the market sentiment currently neutral but showing signs of potential upward movement if resistance levels are broken.

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