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The price of copper in London has climbed close to its highest level this year, as traders try to get their hands on dwindling supplies after a months-long rush to move metal to the US ahead of possible tariffs.
The benchmark London price rose to a more than three-month high of almost $10,000 a tonne on Wednesday. Copper stocks in the London Metal Exchange global network of warehouses have dropped to the lowest level since 2023.
The ructions have hit the trading houses and smelters that hedge their exposure to the metal, pushing up prices and forcing the LME to intervene in the market last month by introducing rules on traders with big positions.
The “frenzied transfer of metal from everywhere outside the US into the US” has made copper “the most emotional metal market going right now”, said Tom Price, an analyst at Panmure Liberum.
Huge volumes of copper have flowed out of Europe and Asia into the US ahead of the possible imposition by the Trump administration of import tariffs on the metal, which is widely used in sectors such as energy, technology and transport. Competition for scarce European and Asian supplies has intensified with big trading houses such as Mercuria and Vitol trying to grow their base metals businesses.
With the market tightening, the LME changed its rules last month, imposing lending requirements on traders with very large positions, to address the volatility being created by some buyers looking to secure large volumes quickly even as stocks run low.
“It’s too dramatic to say the copper market is in crisis but the market is at a very interesting point,” said base metals strategist Alastair Munro of Marex.
The buying frenzy has meant that a typical dynamic of the copper futures market — where prices are usually higher than spot prices — has been upended in a reversal known as “backwardation”. This has meant the spot price last week rose to almost $400 a tonne more than the three-month forward price, the biggest such gap since 2021.
In normal market conditions, the further into the future a contract is dated, the higher the price. This allows smelters, traders and others seeking to hedge their liabilities to “roll” contracts forward without losing money, by buying a near-term contract and selling one further out at a higher price.
The market’s backwardation now poses a risk for sellers of copper: expiring contracts must be settled either by delivering physical metal — which outside the US is in short supply — or by rolling their positions forward at a loss, which entails buying metal at the higher, near-term price while agreeing to sell it in the future at a lower one.
This is threatening to create a so-called “short squeeze” — where firms with an obligation to deliver the metal race to cover their positions — in the market, forcing prices even higher, Bank of America analysts have warned.
“People will be trying to roll their forwards forward,” which in an already tight market is having “an outsized impact on price action,” said Price at Panmure Liberum.
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The so-called “tom-next” — the price of copper tomorrow compared with the price on the day after that — jumped to a premium of almost $100 a tonne last week, the biggest such gap since 2021. This has become a “real stress indicator in the market” with some sellers now “getting hurt”, said Munro at Marex.
Depletion of the LME’s stocks comes as disruptions hit copper production. Ivanhoe Mines’ large Kakula mine in the Democratic Republic of Congo, for example, was hit by flooding in May.
Meanwhile, competition in the market has intensified as some big trading houses have sought to build up their base metals businesses. One unnamed buyer held the right to buy between 50 and 80 per cent of the available warehoused copper in the LME network on Wednesday, according to LME data, giving it the option to request delivery of that metal.
“It’s a big change to the copper market because they’ve got deeper pockets,” said Marex’s Munro. This threatens to make shortages worse, he warned: “We’re talking in two years’ time about real deficits.”
Even if buyers do not ultimately request the physical metal, “those positions are real, and that can create tension in the market,” said Panmure Liberum’s Price.
