Copper prices continue to display remarkable strength despite a high-interest-rate environment. During Monday's European trading session, copper climbed nearly 1%; as of last Friday, the metal had posted gains in 11 of the past 12 weeks. What makes this rally particularly unusual is that monetary conditions are not supportive. The Federal Reserve raised interest rates last week and signaled a more hawkish policy path, which strengthened the dollar and fueled expectations of another potential rate hike later this year—factors that typically weigh on industrial metals—yet copper remains pinned near record highs.

Tariff expectations are drawing copper inventories toward the United States, and this is a core force driving the rally. The Trump administration is currently evaluating whether to expand existing copper tariffs to include refined copper. To get ahead of any policy implementation, traders and producers have massively increased shipments to the U.S., resulting in a significant drawdown of available copper inventories from other regions toward America. Last Friday, a bulk carrier bound for New Orleans was loaded with approximately $500 million worth of African copper, marking the highest-value single-vessel commodity shipment ever recorded by Kpler. New Orleans serves as a critical gateway for Comex copper warehouses operated by CME Group, and local storage space is already nearing full capacity.

According to sources familiar with the matter, roughly 100,000 tons of copper from Africa and South America are scheduled to arrive in September and October, as the U.S. continues to build stockpiles ahead of potential tariffs, with more cargo entering port systems. American storage infrastructure is also expanding rapidly. CME Group has stated that it has added 20 new copper warehouses since the start of 2025, increasing capacity by nearly 725,000 short tons—equivalent to about 39% of annual refined copper consumption in the U.S.

This has created a rare situation in the copper market: rising inventory levels in the U.S. are not simultaneously easing global price pressures. The reason is that these stockpiles are not the result of passive accumulation from weak demand, but rather proactive hoarding driven by policy expectations, which actually squeezes the supply available for trading in other regions.

The arbitrage window between U.S. and international copper prices is narrowing. The price spread that once offered lucrative profits for cross-market transportation is now shrinking. Reports indicate that a metric measuring this arbitrage opportunity currently stands at about $169 per ton, significantly lower than this year's peak of $789 per ton, making further shipments to the U.S. economically less attractive. Rising skepticism over whether the U.S. will ultimately impose tariffs on refined copper is a key factor behind the recent spread compression. The U.S. government has yet to make a final decision, prompting some market participants to reassess their inventory and shipping arrangements that were previously built on tariff expectations.

If shipping directions shift, the inventory map will also be redrawn. Bloomberg reported that some copper not yet shipped could be redirected to Asia, though rerouting cargo already in transit is costly. For now, U.S. ports and warehouses must still absorb the large volume of incoming deliveries accumulated earlier. Ryan McKay, senior commodity strategist at TD Securities, believes that the mere prospect of tariffs has already produced effects similar to actual tariffs: substantial supply has been lured to the U.S., while domestic copper premiums have risen, providing stronger price support for local projects.

Physical tightness remains a key pillar of copper prices in Monday's market performance. Last Thursday, the Fed's policy signals initially strengthened the dollar, yet copper prices only experienced modest consolidation. Sam Crittenden, analyst at RBC Capital Markets, noted that while fading tariff speculation could create short-term price pressure, the fundamental picture remains supportive. Data centers, renewable energy facilities, and mine supply disruptions continue to be major variables on both the demand and supply sides of the copper market. As long as these factors keep underpinning the physical market, tariff-driven inventory migration could further amplify regional spot price differentials.