Copper Hits Record Highs as China Supply Tightens Sharply
LME copper reached $14,710.50 per tonne, driven by a shift to backwardation and rising premiums in Shanghai.
Key points
- LME copper reached $14,710.50 per tonne, approaching its all-time high of $14,875 set in September.
- LME cash futures shifted from an $86 discount to a $26 premium, signaling tight physical supply.
- The Yangshan premium in Shanghai hit a four-year high of $124 per tonne before easing to $119.
Copper prices rose for a fifth consecutive session to $14,710.50 per tonne on the LME. This move brought the metal within two percent of its all-time high.
The rally was driven by tightening supply in China and a return of speculative buying. Traders are positioning for restocking ahead of upcoming national holidays.
Market structure shifts to backwardation
LME cash copper now trades at a $26 per tonne premium over three-month futures. This contrasts with an $86 discount recorded just one week earlier.
The shift indicates urgent physical demand as buyers pay more for immediate delivery. LME warehouse stocks show 45 percent of inventory is already cancelled for withdrawal.
China premiums reach four-year high
The Yangshan premium hit $124 per tonne last week, a four-year peak. This fee reflects the cost of importing copper into Shanghai's main hub.
Refinery maintenance in October and November will limit domestic supply growth. Port congestion in Shanghai further complicates the timing of incoming cargoes.
US inventory buffer begins to shrink
Comex warehouses hold 696,204 tonnes, representing 69 percent of global exchange-monitored stock. This inventory has stopped growing after a recent weekly decline.
The price gap between New York and London has narrowed to 1.6 cents. New Orleans delivery hubs are nearly full, limiting further imports from Africa and South America.
Source NAI500 notes that mine output issues continue to support these price levels. Chilean production fell 9.4 percent in July, and Zambian smelters faced long shutdowns.
