LME copper prices remain steady amid US-bound inventory flows

• CME-LME arbitrage widens amid tariff expectations
  
  
• Improving China, US demand supports sentiment
  
  

Benchmark copper prices on the London Metal Exchange (LME) remained largely stable this week, edging up by around $70/t or 0.5% w-o-w to $13,615/t on 28 May. Prices were supported by easing concerns over disruptions in the Strait of Hormuz following ceasefire discussions between Iran and Israel. However, profit-booking and a firmer US dollar limited stronger upside momentum. Meanwhile, rising LME copper inventories, which increased by 329,302 t y-o-y to a record high for this period and accounted for 41% of total global exchange stocks, reflected comfortable refined copper availability and capped sharper gains.

Continued copper inflows into the US market ahead of a potential decision on copper import tariffs supported prices. The premium of Comex copper futures over LME prices encouraged traders to move material into the US, further tightening global availability and reinforcing nearby market fundamentals.

However, gains were partially capped by profit-booking towards the end of the week, as investors waited for further clarity on the Iran ceasefire agreement and monitored developments surrounding US trade policy. A firmer US dollar also weighed on sentiment, limiting additional upside momentum.

On the demand side, signs of improving consumption in both China and the US supported the market. Copper prices on the Shanghai Futures Exchange continued to trend higher, while expectations of stronger industrial activity and infrastructure demand lent support to the broader outlook.

Overall, copper prices remained supported during the week, driven by tighter global availability, tariff-related inventory shifts, and improving macroeconomic sentiment, although profit-taking and policy uncertainty limited stronger gains.

Global updates

US tariff expectations widen CME-LME copper arbitrage

Expectations of potential US tariffs on refined copper imports continued to reshape global copper trade flows, with the premium of CME copper futures over LME prices widening significantly in forward contracts. Combined inventories across LME, COMEX, and SHFE reached a record 1.28 mnt as of late May, with COMEX accounting for nearly 45% of total exchange stocks following sustained inflows into US warehouses.

The growing arbitrage opportunity has encouraged traders to redirect material into the US market, tightening regional availability elsewhere despite elevated global inventories and reinforcing support for international copper prices.

India updates

India's copper cathode market softened w-o-w as domestic prices tracked declines in both LME and MCX copper benchmarks. Buying activity from wire rod manufacturers, conductor makers, and alloy producers remained cautious, with most consumers procuring material only against confirmed orders amid price volatility.

Meanwhile, Pondy Oxides and Chemicals Ltd (POCL) approved an INR 200 crore investment to establish a 36,000 tonnes per year copper recycling plant in Tamil Nadu, strengthening its presence in the value-added copper segment. The facility will produce LME Grade A copper cathodes using integrated pyro-refining and electro-refining technology, supporting domestic supply amid rising demand.

Outlook

Copper's outlook remains firm, supported by tightening availability outside the US, continued inventory shifts toward the US market, and expectations of potential import tariffs. Improving demand signals from China and the US are also likely to support sentiment.

However, profit-booking, a firmer US dollar, and uncertainty surrounding US trade policy may limit sharper gains. As a result, copper prices are expected to remain stable with a positive bias in the near term.