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Why isn’t there a Taco trade in copper?

The copper market does not appear to think Trump is going to chicken out on his 50 per cent tariffs on the red metal. The copper price rose 13 per cent when the levy was announced — reflecting, presumably, a rush to build US inventories ahead of the tariff’s implementation — and has stayed there. And that’s even after rising steadily for months:

The sharp move makes a striking contrast with equity and currency markets, which have been notably calm to threats against imports from Japan, Korea and Brazil.

What explains this? We see three explanations:

* Trump has stuck with his tariffs on steel and aluminium, which hit 50 per cent earlier this month. Industrial metals are especially important to the president, probably for symbolic and political reasons.

* The copper tariff seems relatively simple, and markets are more likely to price in things they think they understand. National tariffs cover a range of goods and will affect different companies differently. Exposures are complex and hard to calculate. The impact of the copper tariff is easier, in theory if not in practice: figure out how much copper is coming into the country (or company) and multiply by 1.5 to find the new price. The reality is that copper supply chains are quite complex, crossing back and forth across the US border, but reality is not always the main factor in markets.

* The copper tariffs make more sense than some others. There is a reasonably good national security case for the US having native copper supplies and smelting capacity, given copper’s importance in energy generation and Chinese dominance in smelting. And there are copper reserves in the US that higher prices might make more profitable to extract. That does not make the tariff economically efficient, but it is way less dumb than a tariff on, say, Brazilian coffee or Chinese toys.

The Unhedged view remains that Trump, when faced with real pressure from CEOs, markets, or voters, will give up his tariffs quite quickly. That said, however, the Taco trade is not monolithic.

Commodity firms poised for $300mn windfall from US copper tariff trade

Trafigura, Mercuria, Glencore and IXM set for bumper profits from metal shipped into America ahead of new levies

Trafigura, Mercuria, Glencore and IXM could reap bumper profits of more than $300mn after shipping record amounts of copper into the US ahead of tariffs on the metal.

The commodity traders are at the forefront of a trend in which huge quantities of copper are being brought to the US, where a widening price gap with the international benchmark has created a lucrative arbitrage opportunity.

US copper prices surged 13 per cent within minutes of President Donald Trump’s announcement on Tuesday that the US would levy 50 per cent tariffs on copper, twice the expected level, from August 1.

They are now about 28 per cent higher than on the London Metal Exchange, making the traders’ punt — in essence buying at the LME price, shipping to the US and selling at the US Comex price — one of the most profitable metals trades in recent decades.

While analysts question the impact copper tariffs will have on US manufacturers, commodity trading firms have emerged as the clear corporate winners.

A huge copper stockpile has built up in the US this year after trading houses shipped in large quantities as the arbitrage opportunity opened.

Trafigura, Mercuria, Glencore and IXM have brought in about 600,000 tonnes of “excess” copper that is surplus to normal demand since the election in November, according to market insiders.

“Months ago, copper traders worldwide took a punt that Trump’s tariff pitch for their market was real, not bluster. They were right, and their collective pay-off has been spectacular,” said Tom Price, analyst at Panmure Liberum.

“Because so much metal has been sent to the US, you have sucked dry the rest of the world’s copper market,” said one trader.

While exact profits vary widely depending on the structure of the trade, a conservative back-of-the-envelope calculation shows that the four firms’ collective 600,000 tonnes would yield profits of $312mn.

Taking the average differential between the LME and Comex prices since February, when US copper imports picked up, and subtracting an estimated total cost of $500 per tonne, yields a profit of about $520 per tonne, according to FT calculations and information from market participants.

Trafigura, normally the largest copper supplier to the US, has brought in about 200,000 tonnes, according to market participants. Meanwhile Switzerland-based Mercuria will have brought in nearly 200,000 tonnes by the end of the month, according to people with knowledge of the matter.

Glencore, which produces its own copper as well as trading the metal, has brought in between 100,000 and 200,000 tonnes, while IXM has brought in more than 50,000 tonnes.

The stockpile of copper amassed in the US is only the most recent commodity market ruction created by Trump’s tariff policies, after gold and aluminium went through similar build-ups earlier this year.

One of the most vocal advocates of the trading opportunity has been Mercuria, which has rapidly expanded its metals desk over the past two years.

Kostas Bintas, Mercuria’s head of metals, told the Financial Times in March that “copper is going through one of the most exceptional periods in history today” because of the unusual inflows into the US market.

Trafigura, Glencore, Mercuria and IXM declined to comment.

National Grid under renewed scrutiny over network maintenance spending

FTSE 100 company undergoing quarterly reviews by energy regulator in relation to investment in its high-voltage cables

Britain’s energy regulator is carrying out special monitoring of the National Grid as the company faces questions over whether it is doing enough to maintain key electricity networks.

The FTSE 100 company is undergoing quarterly reviews by Ofgem in relation to investment in its network of high-voltage cables, where refurbishment work has been set back by problems including supply chain delays.

The reviews began last year, before the fire in March at a National Grid substation that led to the closure of Heathrow airport and thrust the company into the spotlight.

The resulting power cut knocked out Europe’s busiest hub for 24 hours and led to significant disruption for homes and businesses.  

An official report last month concluded that the substation fire was likely caused by moisture getting into a key part of the transformer, and that National Grid had failed to replace the part despite high moisture readings at its last basic maintenance in 2018. 

An earlier Ofgem report had noted “concerning” underspending by National Grid’s transmission business, with maintenance work outstanding.

In response to questions from the Financial Times over these findings, Ofgem said it was carrying out regular reviews into National Grid’s performance in the maintenance and refurbishment of its transmission network.

It said the reviews started in 2024 and were agreed by both parties during “engagement and monitoring” and were separate to its wider engagement with National Grid on other parts of its business plan. 

National Grid denied there was a specific quarterly review into the health of its assets, but said there was “quarterly engagement with Ofgem on overall delivery against our [transmission] business plan, covering all aspects of our work”, which it said it had itself proposed.

“We believe this proposal allows for a richer picture of our performance than a one off annual report,” it said. 

Separately, Ofgem is investigating National Grid’s compliance with licence conditions relating to the same substation at the centre of the Heathrow fire, and to a substation near Carlisle in northern England. The latter probe started in 2022.

National Grid is one of the private companies that own and run Britain’s electricity transmission and distribution networks, along with SSE, Scottish Power, UK Power Networks and Berkshire Hathaway’s Northern Powergrid.

The sector has faced questions over reliability, including in the aftermath of significant storms in 2021 and 2022 when tens of thousands of homes suffered lengthy power cuts.

The resilience of the UK’s electricity networks is also under increasing scrutiny as the country transitions away from fossil fuels and towards renewable-powered electric vehicles and heating systems, and builds more energy-intensive data centres.

Dieter Helm, an energy expert and professor of economic policy at Oxford university, said the cost of power supply interruptions was “phenomenally higher now than it has been in the past”.

Mathew Lawrence, director of the Common Wealth think-tank, said transmission network owners had “habitually underinvested” in maintenance and called for a shift from an “asset sweating to an asset building” system.

A senior official at the Prospect trade union told the FT last week that electricity networks were underinvesting in maintenance.

National Grid has put itself at the centre of the shift in Britain’s energy system, adding to its transmission network by buying the UK’s largest electricity network in 2021, and selling its stake in Britain’s gas transmission network.

Its strategy has been led by chief executive John Pettigrew, who said in April that he would step down later this year after nearly 10 years in the role. He was paid £6mn in 2024-2025.  

Ofgem regulates how much network owners can spend and charge consumers, via five-yearly price controls, and monitors whether they are spending too much or too little.

National Grid’s transmission business spent 19 per cent less than its unadjusted allowances of £1.3bn for refurbishment and replacements between 2021 and 2024, the Ofgem report said.

This was due to factors including difficulties getting hold of contractors and supplies in a tight market, the report added, while some investments had been recategorised.

National Grid said it expected this gap to close by 2026, forecasting that by then it will have spent more than its allowance.

The company changed its policy in 2023 to make maintenance of its biggest transformers less frequent. It said this was in line with best industry practice. 

National Grid’s transmission division said it had spent £5bn in total on asset health over the past 10 years and plans to spend an additional £5bn on asset health over the next five years.

“National Grid is investing record levels in maintaining our assets and as Ofgem note in their performance report, we will be investing more in the network than we forecast at the start of the price control period,” the company said. “Great Britain has one of the most reliable networks in the world.”

Revolut’s latest breathless valuation

Revolut is in talks to raise new funding at a $65bn valuation to bankroll its American dream.

The UK-based fintech plans to raise $1bn by issuing new shares and selling existing stock, the FT scooped. 

It hopes to use the money to finance its global expansion, with the US market a key target.

The US investment firm Greenoaks is in talks to lead the funding round, and Abu Dhabi’s Mubadala, which first invested in the company last year, is also in discussions to participate. 

Let’s step back and talk about that $65bn figure, though. 

To start, it’s not a typical headline figure but a “blended” valuation, comprising a high price for raising new money and a lower one for existing investors selling their shares. 

Moreover, fintechs often undergo artificial valuation surges at funding rounds. Take Stripe: the payments processor reached a peak valuation of $95bn during a 2021 funding round, and then dropped off to $50bn by 2023. SoFi and Circle also had similar trajectories.

That’s not to mention Revolut’s historical challenges with regulators. 

On top of that, Revolut’s chief executive, Nik Storonsky, has major skin in the game.

If the company climbs to a $150bn valuation, Storonsky is up for a bumper pay package, the FT reported last month.

Fintechs such as Revolut have attracted towering multiples more akin to Silicon Valley tech outfits, but the bread and butter of their business remains the rather more sedate world of retail banking.

So let’s wait until the business goes public before getting too carried away with the top-line valuation. 

Major hurdle removed on path to deal between T-Mobile and U.S. Cellular

A major hurdle has been removed on the path to a deal between T-Mobile and U.S. Cellular.

The Justice Department on Thursday said its antitrust division won’t seek an injunction to prevent T-Mobile from closing on its proposed acquisition of U.S. Cellular.

After the department evaluated the deal, it determined that “the potential harm and offsetting benefits of the transaction do not warrant an enforcement action.”

T-Mobile agreed to buy most of U.S. Cellular’s operations for roughly $4.4 billion in May 2024. The agreement, which includes up to $2 billion of assumed debt, would give T-Mobile more than four million new customers and spectrum rights to carry more data over the air.

Air India Probe Puts Early Focus on Pilots’ Actions and Plane’s Fuel Switches

Investigation into June crash so far hasn’t pointed to problem with the Boeing 787 Dreamliner or its GE Aerospace engines

The investigation into last month’s Air India crash is focusing on the actions of the jet’s pilots and doesn’t so far point to a problem with the Boeing 787 Dreamliner, according to people familiar with U.S. officials’ early assessments.

Preliminary findings indicate that switches controlling fuel flow to the jet’s two engines were turned off, leading to an apparent loss of thrust shortly after takeoff, the people said. Pilots use the switches to start the jet’s engines, shut them down, or reset them in certain emergencies.

The switches would normally be on during flight, and it is unclear how or why they were turned off, these people said. The people also said it was unclear whether the move was accidental or intentional, or whether there was an attempt to turn them back on.

If the switches were off, that could explain why the jet’s emergency-power generator—known as a ram air turbine, or RAT—appears to have activated in the moments before the aircraft plummeted into a nearby hostel for medical students. In all, 260 people died, including all but one of the people onboard the plane.

India’s Aircraft Accident Investigation Bureau, which is leading the probe, is expected to issue a preliminary report as soon as Friday local time. It didn’t respond to a request for comment on Thursday.

“Nothing can be said about the cause of the crash right now because the investigation is going on,” Indian civil aviation official Murlidhar Mohol told NDTV news channel in late June. “It’s a very rare incident—it has never happened that both the engines stopped together.”

Sumeet Sabharwal, a pilot who served as the flight’s captain, had logged over 10,000 hours flying wide-body, or larger, aircraft, and his co-pilot, Clive Kunder, had over 3,400 hours of experience, Air India said. Family members of both pilots declined to comment.

The stakes for determining what factors led to any crash are high and have ramifications for all parties involved. In this case, Air India is the country’s oldest carrier and worked to turn around its operations after decades under state ownership. The crash was the first fatal accident involving Boeing’s Dreamliner at a time when the plane maker is trying to recover from a string of safety and quality problems.

International accident investigations often involve several countries, including those where crashes occurred and whose governments approved designs of aircraft involved. At times, there have been disagreements over access to information and the analysis of facts that emerge.

The U.S. National Transportation Safety Board is providing support for the Indian-led probe. The Federal Aviation Administration, which certified the 787 Dreamliner for passenger service, and Boeing BA -0.23%decrease; red down pointing triangle and GE Aerospace GE 0.89%increase; green up pointing triangle are providing technical assistance to Indian authorities.

The Dreamliner, which entered service in 2011, is popular among the world’s airlines and is commonly used on international, long-haul routes and has had an excellent safety record. Boeing delivered the jet involved in the crash to Air India in January 2014.

So far, U.S. officials’ early assessments of the crash probe don’t indicate a problem with that model aircraft or its GE engines, people familiar with the matter said.

Neither the FAA nor the plane and engine makers have issued any service bulletins or safety directives to address a potential problem with the fleet. Such moves are typical in response to investigation findings if they point to deficiencies in designs, maintenance or operating procedures.

The Air Current, an industry publication, earlier reported that the probe had narrowed its focus to the movement of the engine fuel control switches. Early assessments reached during investigations, which can take a year or longer, can be contradicted as new information emerges.

Indian officials have released little information to the public about the investigation, fueling some frustration with American government and industry officials since the June 12 crash, some people familiar with the matter said.

U.S. government and industry officials have also been frustrated by what they perceived as the slow pace of downloading, analyzing and sharing the contents of the plane’s black boxes, these people said.

Indian authorities had earlier wanted to transport the plane’s black boxes—the flight-data and cockpit voice recorders—away from Delhi, where the country recently opened a new lab for analyzing such accident data, to another secure location, according to some people familiar with the matter.

The plan was scrapped, and Indian investigators wound up downloading the boxes in Delhi.

At one point, the NTSB threatened to withdraw American resources from the investigation. In the end, the American investigators remained in the country to assist. They have since returned home.

Heathrow seeks rise in landing charges to fund £10bn expansion

Airlines expected to oppose airport’s request to regulators to increase the levies

Heathrow airport has asked regulators to approve a 17 per cent increase in landing charges to pay for a £10bn investment programme that it promises will take the airport’s annual capacity to 92mn passengers. 

Heathrow said the average landing charge over the next five-year period would increase to about £33.26 per passenger, up from the current average of £28.46 per passenger. The airport said the proposed levy was lower in real terms than it was a decade ago.

The request is likely to be opposed fiercely by the airlines that use the airport, which has been accused of overcharging and exploiting its position as the premium London hub to charge too much. 

The five-year plan, submitted to the Civil Aviation Authority on Friday, does not include proposals for a third runway. The Labour government has signalled it is minded to approve the expansion and Heathrow is preparing to submit a detailed proposal at the end of July. The third runway, if it goes ahead, is expected to be funded through a different mechanism.

The plan covers the period from 2027-2031. Heathrow said it will add 70,000 square metres of terminal space by converting areas currently not used by passengers, enabling it to add new lounges, shops and restaurants.

The plan will increase the airport’s annual passenger capacity by 10mn to 92mn at the end of the five-year period and cargo capacity by 20 per cent. 

The airport wants to secure permission to demolish Terminal One, expand Terminal Two and build a new southern access tunnel to the central terminal area.

Heathrow shareholders — which include French private equity group Ardian — will contribute £2bn in new equity towards the investment programme, the airport said.

Heathrow chief executive Thomas Woldbye said the plan “boosts operational resilience, delivers the better service passengers expect and unlocks the growth capacity airlines want with stretching efficiency targets and a like-for-like lower airport charge than a decade ago”. 

Under the current regulatory model, Heathrow is allowed to recoup spending on airport improvements through the landing fees it charges airlines, which are typically passed on to customers through ticket prices.

Airlines operating from the airport have fought previous attempts to increase landing charges. The airport was forced to cut its fees for 2024 after demand for flying recovered from the Covid-19 pandemic faster than expected and airlines successfully lobbied against a significant increase in charges.

Airlines led by British Airways owner IAG and Virgin Atlantic have recently launched a campaign to persuade the Civil Aviation Authority to review how Heathrow is funded, amid fears over the final costs of a third runway.

IAG said it welcomed Heathrow’s “intent to improve passenger experience” but said the initial business plan submitted by the airport “requires significant revision”. 

It said the proposed increase in charges was “excessive, particularly given that Heathrow is already the most expensive airport in the world and this plan does not increase capacity”.

The suggested £10bn investment, the group added, “would be paid for by passengers and airlines, raising serious concerns about affordability and value for money”.

Virgin Atlantic similarly criticised the proposal, saying that “only Heathrow, with its monopoly power as the UK’s only hub airport, would think that this £10bn investment plan represents value for money and that’s before any third runway expansion costs are factored into the equation”.

Aircraft programme ‘shortcomings’ are undermining the effectiveness of Britain’s armed forces, NAO says

Britain’s public spending watchdog has warned of “shortcomings” in the country’s F-35 fighter jet programme, with delays, low pilot flying hours and personnel shortages undermining the fleet’s effectiveness. 

The 37-strong fleet last year met only one-third of the Ministry of Defence’s target to perform all required missions, the National Audit Office said on Friday.

Plans to equip the aircraft with important weapons, including UK-developed missiles, have been pushed back until the 2030s, it noted.

The “combined shortcomings of the global and UK F-35 stealth fighter aircraft programme — including delays, lower-than-expected availability, infrastructure gaps and personnel shortages — are undermining the armed forces’ warfighting capability”, according to the watchdog.

The F-35, which is made by America’s Lockheed Martin, is the world’s only advanced, long-range, stealth fighter.

The NAO’s report comes at a sensitive time for the government, which is under pressure to prepare its armed forces for modern warfare while at the same time bolstering the UK’s industrial resilience. 

The damning assessment of the warfighting capabilities of the UK’s F-35 aircraft also revealed the MoD has already spent £11bn on the programme — more than it anticipated in 2013. 

The NAO warned the costs over the lifetime of the programme, including non-equipment expenses such as personnel and infrastructure, could be as high as £71bn — significantly exceeding the department’s public forecast of £18.76bn. 

The programme offers “significantly improved capability and considerable economic benefits to the UK”, said Gareth Davies, head of the NAO.

“But the capability benefits are not being fully realised due to delays, infrastructure gaps and personnel shortages,” he added.

The MoD said the programme “continues to operate within its approved budget and the UK will have two full squadrons of F-35 fighter jets ready for deployment by the end of this year”.

The UK has 38 F-35 fighter jets which operate off the Royal Navy’s two aircraft carriers, although only 37 are currently active. One jet has been stranded at an airport in southern India due to mechanical issues.

Britain has committed to buying 138 F-35s in total, including the recently announced purchase of 12 F-35A jets that are capable of carrying nuclear bombs.  

By committing early to the US-led programme, the UK has benefited industrially and is the sole top tier partner, according to the NAO. British companies manufacture at least 15 per cent by value of all F-35s, resulting in £22bn of contracts for domestic manufacturers. 

But the delays, partly also due to problems with the global programme that has come under fire in the US over its spiralling costs, mean the MoD expects to be able to declare full operating capability of the jets at the end of 2025 — two years later than planned.

The report “does not make for particularly reassuring reading”, said Douglas Barrie, senior fellow for military aerospace at The International Institute for Strategic Studies.

The “prolonged delays in integrating key UK weapons on to the aircraft, that is the Meteor extended range air-to-air missile, and the SPEAR 3 medium-to-long range stand-off missile, also adversely affect the operational effectiveness of the UK aircraft”, he said.

The watchdog’s cost calculations were based on different underlying assumptions, defence officials said.

The MoD’s estimate for the programme’s whole-life costs only relate to the equipment and support expenses associated, they said. The NAO’s calculation, meanwhile, is based on the equipment and support costs and an assumption around the personnel, fuel and related infrastructure costs deemed to be associated with the F-35.