The copper market experienced some relief from a historic squeeze as significant inflows of readily available metal arrived at London Metal Exchange (LME) warehouses. Inventories on warrant 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 contributing a substantial portion. Prior to this recent recovery, stockpiles had dwindled by approximately 75% from a previous high.
Benchmark three-month copper futures on the LME initially fell by as much as 0.5% before recovering slightly to trade at $13,933.50 a tonne in Shanghai. This price movement followed a 1.2% decline on Tuesday, which was the most significant single-day drop since July 23. The influx of copper into LME warehouses alleviated pressure that had built up due to stockpiles being depleted by a surge in shipments to the US. This surge was primarily driven by an arbitrage trade, anticipating import tariffs, though the deadline for the US Commerce Department’s recommendation to President Donald Trump passed in June without any White House announcement.
Further evidence of easing supply tightness includes the narrowing 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 key one-day price spread, known as Tom/next, also decreased after spiking to levels last observed during a major squeeze in 2021. In China, refined copper output saw a 1.3% year-on-year decrease in July, totaling 1.285 million tonnes, as smelter maintenance and raw material shortages constrained production. However, this domestic pressure is now abating, as a favorable import arbitrage encourages more metal flow into China.
