Copper on the Verge of Reaching Record Highs on LME as Supply Tensions Escalate

Copper surged towards a record high, with a crucial price spread in London expanding to atypical levels, signaling fierce competition for supply.

The spot price of the metal was observed trading as much as $478 a ton above contracts for delivery scheduled in three months on the London Metal Exchange, marking the largest gap since a significant squeeze in 2021. This backwardation structure indicates that immediate demand is exceeding availability.

Copper has risen nearly 16% this year, as a significant influx of metal into the US — in anticipation of a tariff decision by the Trump administration — has left other markets with reduced supply. Attention is now shifting to whether China may initiate some exports to alleviate the shortage.

Three-month futures climbed 1.4% to $14,363.50 a ton on the LME at 11:56 a.m. in Shanghai, extending a streak of seven weekly gains. This price surge is edging closer to the intraday record established in January at $14,527.50 a ton.

“There seems to be momentum for it to reach that point,” remarked David Wilson, metals strategist at BNP Paribas SA, in an interview. “It’s entering overbought territory, but it’s unclear if that holds much weight at present, considering the tight conditions.”

Inventories tracked by the LME have plummeted to slightly above 200,000 tons, the lowest level since February. The rising backwardation indicates a market squeeze, as holders of short positions — or bets on losses — are compelled to buy back contracts at rising prices or rapidly secure physical metal for delivery.

An interesting aspect of the current scenario is that global inventories are not particularly scarce; rather, they are concentrated in the US — outside the LME’s network — as traders anticipate President Donald Trump imposing tariffs on refined metal. Furthermore, demand in China is not perceived to be exceptionally robust.

The White House has kept the market in suspense regarding plans for tariffs on refined copper, with no announcements made about seven weeks past a deadline for the Commerce Department’s recommendation. Meanwhile, flows into the US have persisted as markets factor in a potential tariff.

As the cash-to-three month spread spikes, focus is shifting to the possibility of increased copper shipments from China, a common occurrence during periods of extreme backwardation and short-term supply constraints.

“Typically, you would expect to see more Chinese deliveries into the LME,” stated BNP’s Wilson. “However, the question arises, why would you deliver to the LME when you can continue to effectively ship metal into the US?”

Copper’s rise was the most pronounced in a positive start for the LME’s primary six metals on Monday. Aluminum increased by 0.5%, while zinc rose by 0.7%.

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