Key Takeaways
Global commodity trader Trafigura Group on May 22 placed orders to cancel and withdraw over 51,000 metric tons of copper from London Metal Exchange warehouses, the largest single-day request since 2013, as traders rush to capture a lucrative arbitrage premium ahead of a potential US tariff decision.
"LME data showed more than 30,000 metric tons of copper were cancelled, or earmarked for delivery, in New Orleans on Thursday," Reuters reported, citing two industry sources who identified the company as Trafigura. The balance of the massive order was placed in LME warehouses in Kaohsiung, Taiwan. Trafigura declined to comment on the specific transaction.
The withdrawal is the most dramatic evidence yet of a major supply shift in global copper markets. Traders have been moving substantial volumes to the United States in anticipation of import levies that could be imposed following a Section 232 national security review, a decision on which is expected by late June. This has driven copper stockpiles in warehouses monitored by the US-based Comex exchange up by more than 550% since the investigation was ordered in February of last year.
At stake is the ability to lock in supply at pre-tariff prices, creating a significant premium for physical copper located within the United States versus benchmark prices on the LME. The massive withdrawal tightens available supply on the LME, the world's benchmark exchange, and highlights a growing dislocation between futures pricing and the physical location of metal.
The logic behind Trafigura's move is a classic commodity arbitrage that mirrors a recent, similar event in the palladium market. When the price of a commodity in one region—or the anticipated future price, factoring in tariffs—exceeds the price in another region by more than the costs of freight and insurance, a clear incentive emerges. Traders can buy the cheaper international metal, ship it to the higher-priced region, and lock in a profit.
In this case, the pending US tariff decision acts as the catalyst. By withdrawing tens of thousands of tons from LME warehouses in New Orleans—which are typically in bonded zones and not yet subject to US import duties—Trafigura can move the metal into the domestic US market. Should tariffs be imposed, this copper will become significantly more valuable than any new metal that would need to be imported and be subject to the levy.
This dynamic is not unique to copper. In April 2026, China's palladium imports tripled to 8.6 tonnes, a move driven by the same financial logic. A sustained premium on palladium futures contracts on the Guangzhou Futures Exchange (GFEX) made it profitable for traders to buy the metal on the international market and deliver it into China against the higher-priced domestic contracts.
As with the US copper situation, the palladium import surge was not driven by a sudden spike in industrial demand. Rather, it was a financial trade to capture a price differential between two markets. This demonstrates how futures exchanges and trade policies can create powerful incentives that redraw global supply routes, pulling physical metal from one continent to another.
The large-scale movement of copper into the United States is reshaping the global inventory landscape. While COMEX-monitored stocks have swelled, inventories on the LME, the market of last resort, are being drawn down to feed the arbitrage. Total cancelled LME copper stocks now amount to nearly 30% of the total inventory of 391,900 tons.
This shift could increase price volatility on the LME, as the available "free float" of metal shrinks. Industrial consumers in Europe and Asia who rely on the LME network for physical supply may face a tighter market, while their US counterparts will have access to the newly-relocated stocks, albeit at a premium. The episode underscores how geopolitical tensions and trade protectionism can ripple through physical commodity markets, creating winners and losers along the global supply chain.
This article is for informational purposes only and does not constitute investment advice.
