Copper Rallied As LME Inventories Kept Shrinking
Copper | 2026-08-17 11:00:52
By Paul Ploumis
Copper Prices Rise as LME Inventories Shrink to 2021-Like Tightness
Copper prices opened the week higher as London Metal Exchange (LME) inventories continued to decline, tightening near-term supply and pushing market structure back toward conditions last seen in 2021.
What Readers Should Know
- LME copper inventories have fallen by nearly half over the past three months.
- Metal is being pulled into the U.S. ahead of potential refined-copper tariffs.
- Supply concerns persist following maintenance at Indonesia’s Smelting Gresik.
- LME cash-to-three-month spread widened to $473/ton backwardation.
- China’s Yangshan import premium slipped to $90/ton, its lowest in a month.
- Steep backwardation raises risks for short near-dated contracts into Wednesday’s settlement.
MONTREAL (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.
Why prices moved
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.
Some metal is being pulled into the U.S. ahead of potential refined-copper tariffs. Supply worries also linger after maintenance at Indonesia’s Smelting Gresik, per Reuters.
What the inventory data showed
The stress shows up in the LME cash-to-three-month spread, which widened to a $473-a-ton backwardation. That means 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.
Why this isn’t a universal demand boom
Reuters noted end-user buying has cooled at these higher prices. 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 U.S.-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.
People Also Ask
Why are copper prices rising this week?
Because LME inventories have fallen sharply, tightening near-term supply and pushing the market toward 2021-like tightness.
What is backwardation in copper markets?
Backwardation is when near-term (cash) prices trade above later-delivery prices, signaling tight immediate supply.
How large is the current LME copper backwardation?
The LME cash-to-three-month spread widened to $473 per ton.
Why are LME copper inventories falling?
Metal is being pulled into the U.S. ahead of potential tariffs, and supply concerns persist after maintenance at Indonesia’s Smelting Gresik.
What does China’s Yangshan premium indicate?
It fell to $90/ton, its lowest in a month, showing weaker incentive to ship copper into China and a more localized LME tightness.
Courtesy: www.finimize.com
