(Yicai) Sept. 9 -- Copper prices have reached a new historical record on the London Metal Exchange, with Chinese prices also rising to high levels, given rising expectations for potential US tariffs on the metal and concerns over supply.

The three-month copper contract on the LME broke January’s record of USD14,527.50 per ton on Sept. 7, climbing to as much as USD14,533 per ton. It continued to rise yesterday, hitting a new all-time record of USD14,779 per ton.

The most active Chinese copper futures contract on the Shanghai Futures Exchange closed at CNY110,620 (USD16,490) per ton yesterday, after hitting CNY110,890 per ton in intraday trading, surpassing the CNY110,000 per ton threshold for the first time in seven months.

Meanwhile, the most traded international copper futures contract on the SHFE rose to as much as CNY99,200 (USD14,790) per ton yesterday, the second-highest price ever recorded after hitting CNY101,028 per ton on Jan. 30. It then closed at CNY98,860 per ton.

The direct trigger for this round of copper price increase was the transfer of global resources out of the US market due to rising concerns over potential US tariffs, futures analysts told Yicai. The contraction of China’s domestic supply, expectations for interest rate hikes by the Federal Reserve, and the US-Iran conflict are other factors affecting copper prices, they added.

The market strongly believes the United States will impose tariffs on refined copper, said Fu Xiaoyan, senior director of Nanhua Futures Research Institute.

The Commodity Exchange copper futures have long been at a high premium against the LME copper futures, and the COMEX copper inventory accounts for nearly 70 percent of the explicit inventory on global exchanges, leaving non-US global inventories, including the LME, at a low level, Fu noted. Therefore, the LME can attract only the remaining sources by raising copper prices, he explained.

Expectations for US tariffs have led to policy arbitrage, causing a large amount of copper to flow to COMEX warehouses in the US, Zhou Xiaoou, director of non-ferrous research at Zijin Tianfeng Futures, told Yicai. Moreover, some of the copper cargo originally destined for China was rerouted to Southeast Asia, further tightening overseas spot supply.

The LME inventory has fallen sharply, with the proportion of canceled warehouse receipts staying above 50 percent, the number of registered warehouse receipts available for delivery being extremely low, and spot prices remaining higher than futures prices, Zhou noted, adding that these factors have driven up LME copper prices.

Copper mines are scarce and expensive, smelting struggles to reduce losses, and downstream players fear high prices and mainly buy copper for rigid demand, Gu Fengda, chief analyst at Guosen Futures, said about the copper industry.

Looking ahead, the two core factors that will ultimately affect copper prices are whether the US imposes tariffs on refined copper and the Fed’s interest rate decision, Fu predicted.

In the short term, copper prices will continue to fluctuate widely at a high level and gradually shift upward, insiders told Yicai. However, after the US announces tariffs on copper, there is a high probability that all the benefits will be exhausted, with a significant risk of price decline.

Editor: Futura Costaglione