Copper Market Plunges into Historic Squeeze as Tom/next Spread Widens

The copper market experienced another volatile session, marked by a widening of a key one-day spread to levels seen during a historic squeeze in 2021. The Tom/next spread on the London Metal Exchange (LME) spiked to as much as US$110 per tonne, representing the price to roll positions forward by one day.

This trend points to stress for holders of short positions ahead of the third Wednesday of the month, which is the main focus of liquidity in the exchange's contracts. The surge in shipments to the US has shrunk LME stockpiles, driving an arbitrage trade in response to the prospect of US import tariffs.

Copper prices have gained more than 13% this year, fueled by optimism over growing demand from data centers and renewable energy. Despite this, copper inventories in Shanghai are steadily increasing due to elevated prices curbing buying appetite.