Copper’s paper price might be playing dead, but the physical market is screaming for units as the spread violently flips into backwardation. With a ravenous United States arbitrage draining global stocks and majors desperate for M&A, the junior sector is finally poised to capture the windfall of a market running on fumes.
The London Metal Exchange (LME) cash copper price has been treading water, effectively flatlining at US$10,780/t last week, compared to $10,745/t a fortnight ago.
Global copper premiums are being massively inflated due to the continually high LME/CME arbitrage.
The U.S. market continues to aggressively draw in copper cathode, which is leading suppliers to offer historically high premiums outside the U.S. to incentivise material being sent to other markets.
Arbitrage sends prices skyrocketing
While the red metal remains a few hundred dollars shy of its late-October all-time high of $11,174/t, drama is unfolding in the spreads, as in a signal of immediate physical tightness, the market structure has flipped.
Market chatter suggests dwindling warehouse stocks and the looming spectre of U.S. tariffs are squeezing the forward curve, creating a pressure cooker environment just as the industry descends on Shanghai.
While the price gap between the CME and LME - the two major copper indexes - has narrowed to $184/t (down from $301/t), it remains historically elevated.
This "arbitrage window" continues to act as a vacuum, sucking cathode units into the U.S. and leaving the rest of the world scrambling for material.
CODELCO offers customers record-high premiums
State-owned Chilean miner CODELCO stunned the market by offering South Korean customers record-breaking premiums of up to $350/t, ANZ Research revealed in a note.
That's significantly higher than last year’s average $85/t and follows CODELCO's offering a $325/t premium to its European customers last month.
Similarly, European smelter Aurubis offered its customers a record premium of $315/t domestically last month, solidifying the trend of soaring physical costs.
Reason? The U.S. market continues to aggressively draw in copper cathode, which is leading suppliers to offer historically high premiums outside the U.S. to incentivise material being sent to other markets.
Sources noted that the high Korean premium was also in line with recent selling levels in East Asia Ex-China as traders continue to seek units to redirect to the U.S.
Beyond this, in Europe at least, consumers - though disgruntled that premiums have to be higher - are reportedly more willing to secure long-term units this year as they fear the arbitrage will create severe tightness in 2026, says Benchmark Intelligence.
Copper imports fall
The U.S. has released August’s import data for copper, and unsurprisingly, volumes fell significantly to 118,000t in August against July’s 223,000t.
However, 118,000t is still comfortably higher than normal monthly imports of refined copper into the U.S., indicating that the pull of the North American market remains strong.
August’s imports are the first data shared after the U.S. announced it would not be imposing a tariff on refined copper in late July - as a result, the arbitrage collapsed significantly, from $2,638/t to $23/t between July 30 and 31.
Sources reported at the time that U.S. imports from Chile slowed significantly, with producers believing they wouldn’t beat the expected August 1 deadline for copper to be imported into the U.S. tariff-free.
Proof in the pudding - imports from Chile halved from 102,000t in July to 51,000t in August.
The data confirms what most participants expected - that copper continues to flow to the U.S. at above-normal levels. As it does so, high premiums like those covered above will continue to be a significant feature of the global market for the remainder of the year, says Benchmark Intelligence.
M&A and junior watch
The tightness in physical markets is being mirrored by aggressive positioning in the corporate landscape.
As RBC Capital Markets forecasts copper prices to rise from $4 to $5 per pound this decade - driven by a surging need in EVs, clean energy, and digital infrastructure - the scramble for assets is intensifying.
The M&A scene is currently defined by a heavy concentration on the majors - Teck Resources, Rio Tinto, Anglo American, and BHP - all of whom are actively seeking to increase their copper weighting.
However, with mega-mergers facing regulatory and valuation hurdles, the spotlight is increasingly pivoting toward mid-tiers and juniors that offer leverage to the price deck.
- Sandfire Resources (SFR): Sandfire has executed a binding term sheet with Havilah Resources (HAV) to earn up to 80% of the Kalkaroo Copper-Gold Project in South Australia. The deal involves a two-stage A$210 million consideration plus a A$30 million regional exploration commitment.
HAV retains 20% free-carried to FID. RBC Capital Markets says the transaction has low initial cash outlay and provides the option to develop another operating asset in a "friendly jurisdiction".
- Oroco Resource Corp: Attention is also shifting to developers like Oroco and its Santo Tomás project in northwest Mexico. The deposit has the potential to produce >86,000tpa over its first seven years - and at $3.85 copper price, that’s a projected metal value of $18.6 billion.
Supply
- Harmony Gold sanctions Eva copper project: The South African miner has approved the $1.6 billion development in Australia, marking a strategic pivot from pure-play gold to secure long-life copper exposure. The asset is projected to deliver 60,000t of red metal per annum.
- China kicks off TAZARA modernisation: Beijing has commenced the $1.4 billion upgrade of the Tanzania-Zambia railway (TAZARA), revamping the Mao-era line to accelerate African mineral exports and cement Belt and Road connectivity.
- CODELCO looks to India: The Chilean giant has signed an exploration agreement with Adani to jointly assess copper projects in Chile, strengthening bilateral ties and securing supply lines for the energy transition.
Demand
- Capital flows to Canada: The UAE has announced plans to invest up to $50 billion into Canada’s mining, energy, and AI sectors following a new investment framework agreement.
- EU pledges billions for Africa: The European Commission has launched a campaign pledging €15.5 billion ($16.3 billion) into renewable projects across Africa, aiming to bring 26.8GW of new generation capacity online.
- Brookfield eyes AI infrastructure: Brookfield Asset Management is reportedly looking to raise a $10 billion fund specifically targeting investments into the physical infrastructure required for artificial intelligence.
