LME Copper Inventories Plummet to Levels Not Seen Since 2021

Copper prices surged at the start of the week as London Metal Exchange (LME) inventories continued to dwindle, driving near-term pricing back towards tightness last seen in 2021. This comes after stocks in exchange-registered warehouses fell by nearly half over the past three months due to metal being pulled into the US ahead of potential refined-copper tariffs and supply worries lingering after maintenance at Indonesia's Smelting Gresik.

The stress shows up in the LME cash-to-three-month spread, which widened to a $473-a-ton backwardation. This means buyers are paying up for prompt delivery versus later delivery, putting pressure on those short near-dated contracts. The setup also makes it costly for holders or shorts to roll their positions, as they may have to repeatedly buy the more expensive nearby contract into the exchange's monthly settlement on Wednesday.

The tightening market isn't a universal demand boom, however. End-user buying has cooled at these higher prices, and China's Yangshan import premium, a gauge of how attractive it is to ship copper into China, slid to $90 a ton, its lowest in a month. This weaker pull from China may keep the shortage concentrated in LME deliverable supply rather than lifting the whole curve equally.