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Trafigura, Mercuria, Glencore and IXM could reap bumper profits of more than $300mn after shipping record amounts of copper into the US ahead of tariffs on the metal.<\/p>\n
The commodity traders are at the forefront of a trend in which huge quantities of copper are being brought to the US, where a widening price gap with the international benchmark has created a lucrative arbitrage opportunity.<\/p>\n
US copper prices surged 13 per cent within minutes of President Donald Trump\u2019s announcement on Tuesday that the US would levy 50 per cent tariffs on copper, twice the expected level, from August 1.<\/p>\n
They are now about 28 per cent higher than on the London Metal Exchange, making the traders\u2019 punt \u2014 in essence buying at the LME price, shipping to the US and selling at the US Comex price \u2014 one of the most profitable metals trades in recent decades. <\/p>\n
While analysts question the impact copper tariffs will have on US manufacturers, commodity trading firms have emerged as the clear corporate winners.<\/p>\n
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A huge copper stockpile has built up in the US this year after trading houses shipped in large quantities as the arbitrage opportunity opened. <\/p>\n
Trafigura, Mercuria, Glencore and IXM have brought in about 600,000 tonnes of \u201cexcess\u201d copper that is surplus to normal demand since the election in November, according to market insiders.<\/p>\n
\u201cMonths ago, copper traders worldwide took a punt that Trump\u2019s tariff pitch for their market was real, not bluster. They were right, and their collective pay-off has been spectacular,\u201d said Tom Price, analyst at Panmure Liberum. <\/p>\n
\u201cBecause so much metal has been sent to the US, you have sucked dry the rest of the world\u2019s copper market,\u201d said one trader.<\/p>\n
While exact profits vary widely depending on the structure of the trade, a conservative back-of-the-envelope calculation shows that the four firms\u2019 collective 600,000 tonnes would yield profits of $312mn.<\/p>\n
Taking the average differential between the LME and Comex prices since February, when US copper imports picked up, and subtracting an estimated total cost of $500 per tonne, yields a profit of about $520 per tonne, according to FT calculations and information from market participants.<\/p>\n
Trafigura, normally the largest copper supplier to the US, has brought in about 200,000 tonnes, according to market participants. Meanwhile Switzerland-based Mercuria will have brought in nearly 200,000 tonnes by the end of the month, according to people with knowledge of the matter.<\/p>\n