Copper squeeze builds with spreads surging and price near record

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeMiningNewsCopper squeeze builds with spreads surging and price near recordA quirk of the current situation is that total global inventories are not particularly low, but are concentrated in the U.S.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.LME warehouses are a crucial last-resort source of supply to the physical copper industry, and metal in its depots can also be used to close out expiring futures contracts. Photo by Bartek Sadowski/BloombergCopper rose toward a record on the London Metal Exchange, with soaring price spreads highlighting an increasingly acute squeeze in near-term supply.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe metal’s spot price traded as much as US$545 a metric ton above the three-month futures contract, the widest backwardation since a historic squeeze in 2021 prompted the adoption of emergency measures to contain a runaway rally. Other spreads also surged, and futures closed in on a US$14,500-plus peak reached during a spike in January.The current supply crunch is being fuelled by a surge in shipments to the United States in anticipation of a potential decision on import tariffs, while recent tightness in China has also drawn cargoes there. That has led stockpiles across the LME’s global warehousing network to shrink by almost half since mid-May.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againInvestors were already warming to the metal, whose biggest application is in electrical wiring. They cite longer-term themes of robust demand powered by the energy transition toward electrification, the need to build data centres and infrastructure for artificial intelligence, as well as the mounting industry challenge of finding and funding new mining pits.The elevated premium for the near-term delivery of copper “points to continued scarcity of available metal,” said Ewa Manthey, a commodities strategist at ING Groep NV. “We expect these supply constraints to keep the market well supported in the near term, particularly if demand remains resilient.”Monday’s fireworks came at a key moment in the LME’s calendar, just ahead of the third Wednesday of the month, which is the main focus of liquidity in the exchange’s contracts.Traders and brokers with short positions on that date were trying to cover their positions by buying cash contracts and selling later-dated ones, driving spreads higher, according to market participants. On the other side, owners of metal have been reluctant to relinquish it given the lucrative arbitrage opportunities presented by a surge in U.S. prices on speculation of tariffs.LME warehouses are a crucial last-resort source of supply to the physical copper industry, and metal in its depots can also be used to close out expiring futures contracts.Global benchmark three-month futures settled little changed at US$14,157.50 a metric ton, after earlier advancing as much as 1.7 per cent on the LME.Stockpiles tracked by the LME rose above 207,800 tons, after ending last week at its lowest volume since February. Monday’s 1.4 per cent increase ended a 42-day streak of declines, the longest since 2014.Unbalanced InventoriesA quirk of the current situation is that total global inventories are not particularly low, but are concentrated in the U.S. as traders bet on President Donald Trump slapping tariffs on the refined metal. In addition, demand in China is not seen as particularly strong, but smelters there have struggled with feedstock supplies, increasing the need for imports.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The White House has kept the market guessing on plans for levies on refined copper, with no announcement emerging about seven weeks after a deadline for the Commerce Department to make a recommendation. Meanwhile, flows to the U.S. have continued as markets price in a potential tariff.With the cash-to-three month spread spiking, attention is turning to whether more copper might emerge from China, which often happens during periods of short-term supply pinches.Among other LME metals, aluminum rose 0.4 per cent, while zinc was up 0.3 per cent, with advances also driven by a weaker U.S. dollar, which aids commodities priced in the currency.We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.