Tariffs have supercharged turbulence in commodity markets
Trading is, by and large, a business that stock markets don’t love. Companies that flip equities, oil or other commodities often end up valued at low multiples of their profit, because investors assume good times will invariably be followed by bad. That’s reasonable. But in a world knotted up by trade wars, those buying and selling metals have an opportunity to turn themselves into reliable winners.
Tariffs have supercharged turbulence in commodity markets. It isn’t just that prices of metals such as copper and aluminium move around a lot. It is that those in different places, or for cargos delivered at different times, move around more than usual. That provides an opportunity for the canny arbitrageur — think Glencore, but also privately held Mercuria and Trafigura — to shine.
Aluminum, say, costs about $3,000 per tonne in London. Donald Trump’s 50 per cent tariff on the metal implies that the US price should settle at $4,500 plus freight costs. Yet the so-called Midwest premium has ballooned to roughly $2,300 per tonne. That extra $800 gap is an open invitation for traders to source aluminium in London, ship it to the US, pay the tariff, and still capture a handsome margin. The price of copper in the US also leapt well beyond the increases in London last summer as tariff-fearing traders stockpiled the metal.
Traders can benefit from this sort of thing twice over. As metals head to the New World, the quantities stored in the London Metal Exchange-registered vaults fall, reducing the amount that is available for immediate delivery. In June and the last few months of 2025, that drove the price of “spot” copper above the price of cargos for delivery three months hence — an unusual situation in the metals market. Anyone with copper on hand would have been positioned to benefit.
Aluminum, too, has seen the spread between spot and three-month prices swing around. This volatility could benefit traders, who may have more of the stuff lying around than the LME inventory suggests. About 85 per cent of estimated above-ground inventory is held off-exchange, according to commodity analysts at BMO.
Metals traders are already looking pretty buffed. On Wednesday, Glencore — both miner and merchant — said last year’s ebitda at its metals and minerals marketing division grew by a fifth. Mercuria, the Geneva-based commodities trader, posted profit of $1.3bn, making 2025 its fourth-best year on record. Trafigura’s metals and minerals division — 30 per cent of the company by revenue — saw ebitda rise to $2bn.
For Glencore, the idea that metals trading may have become structurally more profitable — and therefore deserving of a higher valuation — will be particularly welcome. The company’s merger talks with Rio Tinto collapsed because it wanted a higher share of the combined pie than implied by its market capitalisation. Had investors prized Glencore’s trading arm more highly, that problem might have disappeared. Perhaps in time the Swiss metals giant’s ambition will look less outlandish.
By – https://www.ft.com/content/4aba02eb-6c54-429b-be8a-091250e113db