Copper prices held losses after a substantial delivery of metal to London Metal Exchange (LME) warehouses helped mitigate a historic supply squeeze. Inventories of readily available copper in the LME's global network of warehouses surged by over 35,000 tons, marking the largest increase since 2024. This followed an earlier rise of more than 20,000 tons, with Trafigura Group reported to be a significant contributor to these inflows.
Benchmark three-month copper futures on the LME saw a decline of up to 0.5%, trading at $13,933.50 a tonne. This downturn followed a 1.2% drop on Tuesday, which was the most substantial one-day decrease since July 23. The influx of copper has provided some relief after LME stockpiles had been depleted due to a surge in shipments to the US, driven by an arbitrage trade anticipating import tariffs.
Despite the easing of the immediate squeeze, signs of underlying physical tightness persist in the market. In China, refined copper output decreased by 1.3% year-on-year to 1.285 million tonnes in July, attributed to smelter maintenance and raw material shortages. However, an encouraging import arbitrage is now facilitating more metal flow into China, helping to alleviate domestic spot market pressure.
Another indicator of easing tension was the narrowing of the closely watched spread between copper for immediate and three-month delivery, which dropped to $248 a tonne on Tuesday from a backwardation of up to $545 on Monday. The one-day price spread, known as Tom/next, also decreased after spiking to levels last observed during a major squeeze in 2021. ING's commodities team noted that these developments have led to a trimming of speculative net long copper positions, signaling a moderation in bullish sentiment.
The increase in LME stocks was the largest daily rise since April, extending gains for a sixth consecutive session to 123,100 tonnes. This improvement in supply conditions followed a period where inventories were depleted by strong shipments to the US, driven by tariff-related arbitrage opportunities. The US Commerce Department's recommendation on refined copper duties, due on June 30, has not yet been published, leaving a proposed 15% tariff for January 2027 and 30% in 2028 unresolved.
