LME copper hits an all-time high! Tariff arbitrage triggers a short squeeze in LME copper; major mine output cuts intensify supply-side pressure.

Copper prices have surged to a record high on the London Metal Exchange (LME), driven jointly by expectations of new tariffs and mounting supply constraints from mining operations—highlighting deep-seated structural tensions facing this critical industrial metal. On Monday, the LME’s benchmark three-month copper futures contract rose as much as 0.8% intraday, reaching $14,533 per tonne—surpassing the previous all-time high set in January this year—before pulling back slightly; at time of writing, LME copper was up 0.73%. So far this year, copper prices have risen 17%; over the past 12 months, the gain has reached 47%. This record-breaking rally unfolded against the backdrop of a U.S. exchange holiday (Labor Day) and broadly subdued market risk appetite—underscoring the extraordinary strength of the underlying drivers. Cristián Cifuentes, Senior Analyst at Cesco—the Chilean copper industry think tank—observed that this rally is "driven more by tariff-induced metal relocations than by robust end-demand," representing essentially "a localized shortage, not a global demand surplus." Meanwhile, global mine supply remains under strain: should the sector fail to achieve a meaningful recovery in the second half of the year, global mined copper output will post its first annual decline since 2017. Tariff expectations drive large-scale metal flows into the U.S. The key near-term catalyst behind this copper rally is persistent market anticipation of expanded copper tariffs under a potential Trump administration. Since Donald Trump first formally proposed imposing tariffs on copper in February last year, New York Mercantile Exchange (COMEX) copper futures have consistently traded at a substantial premium to LME prices—opening a wide arbitrage window for traders. This year alone, hundreds of thousands of tonnes of copper have been shipped en masse to the United States to capture this price differential. It has now been roughly two months since the U.S. Department of Commerce’s original deadline to submit its report on tariff necessity to the White House—but the report remains unpublished. Markets continue pricing in the possibility of import duties on primary copper. This "tariff trade" has exerted a pronounced drawdown effect on global inventories. In August, physical copper stocks backing LME contracts plunged to a critically low level, triggering a broad-based short squeeze. Although subsequent inflows of new material have eased some pressure, the LME spot copper price remains significantly above the three-month futures price—leaving the market in persistent backwardation—a clear signal that immediate supply remains tight.

Copper prices approach yearly highs: U.S. buying frenzy ignites the 'most emotional metals market'!

Analysts warn that intensifying competition for scarce supply could trigger a "short squeeze," pushing prices even higher. Sellers face mounting pressure—either to deliver physical metal or incur losses rolling over their positions. Non-U.S. supply shortages propel price surges Recently, large volumes of copper have flowed from Europe and Asia into the United States, anticipating possible import tariffs by a Trump administration on this metal—widely used across energy, technology, and transportation sectors. Tom Price, analyst at Panmure Liberum, stated: "Metals are being frantically shifted into the U.S. from everywhere outside America"—making copper "the most emotional metals market right now." Competition for scarce European and Asian supplies has intensified, prompting major trading houses—including Mercuria and Vitol—to expand their base metals businesses. As market conditions tighten, the LME last month revised its rules to impose lending requirements on traders holding large positions—aimed at curbing volatility caused by buyers scrambling for large quantities of metal amid insufficient inventory. This buying frenzy has pushed copper futures markets into steep backwardation: last week, the spot price stood nearly $400 per tonne above the three-month forward price—the widest such gap since 2021. The so-called "overnight spread"—the difference between tomorrow’s copper price and the day after’s—jumped last week to a premium of nearly $100 per tonne, the largest since 2021. Alastair Munro, Base Metals Strategist at Marex, remarked: "This has become a true stress indicator for the market," with some sellers now "getting hurt."

LMEWEEK: Copper Squeeze Breathes New Life into Old Mines

17 hours ago

Record copper prices and shortage fears are prompting miners like Sibanye-Stillwater to revive idled operations such as Mt Lyell. These restarts aim to bridge the projected global supply gap driven by energy transition demand by 2030.

reuters

2026-10-14

LMEWEEK: Copper Squeeze Breathes New Life into Old Mines

LMEWEEK: Copper Squeeze Breathes New Life into Old Mines

FAQ