JPM-Base Metals Flash Note US copper tariffs do not apply to cathode-20250731

•50% copper tariff will apply to semi-finished copper products and copper-intensive derivative products, but not to copper ores, concentrates,mattes, cathodes, anodes, and scrap.

•US COMEX copper prices collapse as the premium above LMEevaporates given cathode’s exemption. COMEX prices will now likely feelthe full weight of excess US inventory though cannot dislocate too farbelow LME prices given the ability to deliver COMEX metal into LMEsheds in the US to close the arb if COMEX falls too far below LME.

•For the ex-US market and LME prices, this will still bring about anunwind of 1H25 frontloading. US refined copper prices will likely trade ator slightly below LME prices to disincentivize additional US imports,meaning that copper flows are still more materially re-directed away fromthe US for a period of months now.

•Moreover, there is now the added potential risk that LME stocks could risemuch quicker on direct deliveries of US copper stocks into US LMEwarehouses.

•Overall, this still keeps us cautious on LME prices as front loadingunwinds over the coming months.

•Instead of the cost of the tariff being embedded into refined COMEXcopper prices, the 50% tariff will now be embedded into US premiums forsemi-fabricated copper products and end use prices for copper derivativeproducts.

•As it's structured now, this copper tariff could incentivize the US tobecome self-sufficient in copper product production, though it's unclear ifit will significantly move the needle in terms of overall US copper inputself-sufficiency.