Commodity Traders Capitalize on Trade War-Induced Market Turbulence

Commodity traders are experiencing increased profitability due to the volatility in metal markets spurred by ongoing trade wars. While trading businesses are often valued at lower multiples due to inherent cyclicality, the current environment presents opportunities for arbitrage and profit generation.

Tariffs and Arbitrage Opportunities

Tariffs, particularly those implemented by Donald Trump, have created price discrepancies between different regions and delivery timelines. For example, a 50% tariff on aluminum imposed by the US, while London prices sit around $3,000 per tonne, theoretically should push US prices to $4,500 plus freight. However, the “Midwest premium” has risen to approximately $2,300 per tonne, creating an $800 gap for traders to exploit.

This arbitrage opportunity allows traders to source aluminum in London, ship it to the US, pay the tariff, and still capture a substantial margin. Similar dynamics have been observed with copper, where stockpiling ahead of tariffs led to price increases in the US beyond those seen in London.

Spot and Three-Month Price Spreads

The influx of metals into the US has reduced quantities available in London Metal Exchange (LME) registered vaults, impacting spot prices. In June and late 2025, spot copper prices briefly exceeded those for delivery in three months – an unusual occurrence. Traders holding copper inventories were well-positioned to benefit from this situation. Aluminum has as well experienced similar swings in the spread between spot and three-month prices.

Financial Performance of Major Traders

Several major commodity trading firms have reported strong financial results. Glencore, a miner and merchant, saw a 20% increase in EBITDA at its metals and minerals marketing division last year. Mercuria, based in Geneva, posted a profit of $1.3 billion, marking its fourth-best year on record. Trafigura’s metals and minerals division, representing 30% of the company’s revenue, experienced an EBITDA rise to $2 billion.

Implications for Glencore and Potential M&A Activity

The potential for structurally higher profitability in metals trading is particularly significant for Glencore. The company’s previous merger talks with Rio Tinto faltered due to valuation disagreements. A higher valuation for Glencore’s trading arm could have facilitated the deal, and future market recognition of this value may make similar ambitions more attainable.

Source: Financial Times