Copper prices near record highs as LME supply squeeze deepens

Copper prices surged at the start of the week as a worsening physical supply squeeze on the London Metal Exchange pushed the metal toward its all-time highs, with spot premiums over forward contracts reaching levels not seen since the historic market dislocation of 2021.

A Deepening Backwardation

The cash-to-three-month spread on the LME widened to as much as $543.50 per ton, according to XTB analysis published Monday, while the August-over-September spread hit $370 — the widest one-month gap since 2021, according to Bloomberg. The extreme backwardation signals that buyers are willing to pay sharp premiums for immediately deliverable metal, a hallmark of physical shortage.xtb+1

LME warehouse stocks have declined for 42 consecutive trading sessions, the longest such streak since 2014, falling to roughly 205,000 tons. Nearly half of that remaining inventory has already been earmarked for withdrawal. The drawdown has been driven in part by major trading houses Mercuria, Trafigura, and Vitol pulling copper from LME-registered warehouses.facebook+1

US Tariff Expectations Distort Global Flows

The squeeze reflects not a global shortage of copper but a geographic mismatch. Expectations that the Trump administration may impose further tariffs on refined copper imports have created an arbitrage incentive, drawing metal toward US Comex warehouses and draining supply from LME locations in Asia and Europe. American prices have at times traded more than $1,000 per ton above London, rewarding traders who redirect cargoes across the Atlantic.xtb+1

At the same time, Chinese smelters have cut output due to deteriorating ore quality and a scrap shortage caused by tightened invoice controls in the recycling sector, further straining available refined supply in Asia.xtb

Outlook

Copper set its all-time high above $14,500 per ton in late January, and three-month LME futures have gained roughly 15% this year. With short-position holders facing continued pressure to buy back contracts at rising prices, analysts warn the metal could revisit or surpass that record. The LME introduced emergency lending measures last week to contain the rally, but market participants say the squeeze appears systemic rather than driven by any single dominant position. Until tariff clarity emerges from Washington, the competition for immediately deliverable copper is likely to remain fierce.mining+4