Copper Rallied As LME Inventories Kept Shrinking

Copper  |  2026-08-17 00:20:31   |   By

SEATTLE (Scrap Monster): Copper prices started the week higher as London Metal Exchange (LME) inventories kept shrinking, pushing the market’s near-term pricing back toward the kind of tightness last seen in 2021, Reuters reported.

What does this mean?

Copper is a global workhorse metal, so prices can move fast when available supply in the “right now” market dries up. That’s what’s happening on the LME: stocks in exchange-registered warehouses have fallen by nearly half over the past three months, as some metal is pulled into the US ahead of potential refined-copper tariffs and as supply worries linger after maintenance at Indonesia’s Smelting Gresik, per Reuters.

The stress shows up in the LME cash-to-three-month spread, which widened to a $473-a-ton backwardation, meaning buyers are paying up for prompt delivery versus later delivery. That setup pressures anyone who’s short near-dated contracts (including some hedgers), because rolling those positions can mean repeatedly buying the more expensive nearby contract into the exchange’s monthly settlement on Wednesday.

But this isn’t a universal demand boom. Reuters noted end-user buying has cooled at these higher prices, and China’s Yangshan import premium – a gauge of how attractive it is to ship copper into China – slid to $90 a ton, its lowest in a month. That weaker pull from China can keep the shortage concentrated in LME deliverable supply rather than lifting the whole curve equally.

Why should I care?

For markets: That $473-a-ton backwardation makes the front end of copper unusually risky.

When a market is in steep backwardation, holding or staying short near-term contracts can carry a real cost: you may have to pay up to close or roll positions because the “now” price sits well above the “later” price. With LME inventories low, that dynamic can trigger abrupt moves in nearby spreads and raise the risk of short squeezes into key dates like Wednesday’s settlement.

At the same time, a softer $90 Yangshan premium suggests less incentive to ship metal into China. If US-bound flows stay strong because of tariff worries, the tightness could linger where it hurts most: in deliverable LME supply and prompt spreads, rather than in longer-dated copper pricing.

Courtesy: www.finimize.com