London: The global copper market is showing signs of an intensifying supply squeeze, with prices trading close to record highs and premiums for immediate delivery surging on the London Metal Exchange (LME). The sharp widening of futures spreads is highlighting growing concerns about the availability of physical copper in the near term.
LME spot copper recently climbed to around $14,500 per tonne, approaching the record level set earlier this year. The rally reflects a combination of strong demand, declining exchange inventories and concerns over the availability of refined metal outside the United States.
LME Spreads Signal Tight Physical Supply
One of the clearest signs of market stress is the widening gap between copper available for immediate delivery and contracts for delivery at a later date.
The LME August copper contract traded as much as $370 per tonne above the September contract, marking the widest one-month spread since the major copper squeeze of 2021. The cash-to-three-month spread also widened to about $434 per tonne, indicating that traders are paying a substantial premium to secure metal immediately.
This market structure, known as backwardation, generally occurs when immediate demand for a commodity exceeds readily available supply. Buyers are effectively willing to pay more for copper now rather than wait for future deliveries.
Inventories Continue to Fall
The tightening market has been accompanied by a sustained decline in LME warehouse inventories. Stocks have fallen for 42 consecutive business days, reaching roughly 204,975 tonnes, according to recent market data. A significant portion of the remaining inventory has also been earmarked for withdrawal.
The movement of copper toward the United States has added to concerns about availability elsewhere. Expectations surrounding US tariffs on refined copper have encouraged traders to move metal into the country, reducing supplies held within the LME warehouse system.
Supply Concerns Add to Price Pressure
Copper’s rally is also being supported by concerns about mine supply and disruptions across major producing regions. The market has become increasingly sensitive to production setbacks because bringing new large-scale copper mines into production can take years.
The Democratic Republic of Congo’s decision to restrict copper concentrate exports has added another layer of uncertainty. Although the long-term impact of the measure on global supply remains debated, it has contributed to concerns in an already tight raw-material market.
At the same time, strong demand from electrification, renewable-energy infrastructure, power grids, electric vehicles and data centres is supporting the longer-term outlook for copper. The expansion of artificial intelligence infrastructure is also increasing expectations for electricity and copper-intensive equipment.
Market Watches for Another Record
With copper already trading close to its all-time high, traders are closely watching LME inventories, warehouse withdrawals, mine disruptions and the direction of US tariff policy.
A sustained period of backwardation could indicate that the physical market remains under significant pressure. However, extremely high prices could eventually encourage additional supply, reduce consumption among price-sensitive buyers or trigger profit-taking by investors.
For now, the combination of falling inventories, record-level prices and exceptionally wide spreads suggests that the copper market is facing unusually tight near-term conditions.
The developments are significant for miners, manufacturers, cable producers, construction companies and other major copper consumers, as prolonged shortages and elevated prices could raise input costs across several industries.