Fortune Favors The Brave

Most of the recent talk around the LME/CME copper arb has focused on the physical side:

• Can cargoes reach the US in time?
• When should traders execute?
• What alternative plans should traders be making?

But historically, the highs and lows of this trade have been driven more by speculation than by physical flows.

Right now, the arb sits around $2,500 CME over LME, down from ~$3,000 before Chile suggested its cathode might be tariff-exempt.

But there are strong rumors that all cathode could be exempt and that any tariffs might focus on secondary products only.

If that happens, the arb could collapse quickly back to flat. Duty-free imports would remove the drivers behind the recent surge.

Even if broad 25% tariffs on cathode materialize, most of that risk seems priced in already. With analysts viewing 50% tariffs as unlikely, the risk/reward on selling CME / buying LME (with ~$3k top vs ~$0 bottom) might appeal to those brave enough.

This is of course tea-leaf reading ahead of any Trump announcement.

Do you think the arb will collapse, hold these levels, or increase from here?

Not financial advice. Do your own research.