1. Supply Squeeze Triggers Backwardation Surge
Plunging copper inventories in London Metal Exchange (LME) warehouses have flipped the market into sharp backwardation, with the cash contract premium over three-month futures hitting $93/ton on Thursday – the highest since December 2022. This marks a dramatic reversal from April’s $63/ton discount as:
- Total LME stocks halved since mid-February to 132,400 tons (lowest in 11 months);
- Immediately available stocks collapsed to 54,600 tons (10-month low).
2. Triple Pressure Points
The shortage stems from converging forces:
- Metal Exodus: 58,000+ tons diverted to COMEX since April, lured by higher U.S. prices;
- Fresh Cancellations: Thursday’s warrant cancellations spiked the premium before easing to $75/ton Friday;
- Trade War Fears: Traders preemptively ship metal to U.S. ahead of potential copper tariffs.
3. Structural Vulnerabilities Exposed
While no single entity dominates July contracts, one player held >90% of cash contracts as of June 4 – artificially extending the backwardation. This compounds existing strains from:
- Mine Disruptions: Major producers like Cobre Panama face operational halts;
- Refinery Bottlenecks: Treatment charges near 4-year lows indicate concentrate scarcity.
LME Copper Stocks Halve, Sending Nearby Contracts to 2.5-Year Premium High