- Copper stocks currently on the London Metal Exchange hit the lowest level since 1974, in a global squeeze on dramatic supplies that s sent spreads spiking and helped drive prices back above $10,000 a ton.
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None What is the front line of U.S. Copper tracked by LME warehouses that s not already earmarked for withdrawal has plunged 89% this month after a surge in orders from warehouses in Europe. Stockpiles have also been priced tight on rival bourses and limited storage, and LME spreads have entered historic levels of backwardation, with new contracts trading at huge premiums.
Copper rose as much as 1.2% to $0.056 in the LME and became $10,108 a ton. The metal is on track for a weekly gain of 7.8%, which would be the biggest since 2016 week to week.
The weaking global stockpiles and the resilient demand for copper stand in stark contrast to mounting worries about the macroeconomic outlook and the threat that stagflation and power shortages could derail the world s strong growth trajectory. Friday, Chinese inventories also dropped with Shanghai Futures Exchange stockpiles decreasing to 41,668 tons, the lowest level since 2009.
Earlier Friday, LME copper contracts expiring in one business day period traded at a premium of $175 to those maturing a day later, blowing past peaks seen during other short-term supply squeezes over recent years. That s the biggest backwardation in data going back to 1998. The premium was just 1 at the closing of the market on Monday.
One reason that the tom next spread rarely trades in such large backwardations is that the LME force anyone with a dominant holding in inventories and spot contracts to loan them back to buyers at pre-determined rates based on the size of their positions.
While that s a cap on the spread during previous short-term LME supply squeezes, the latest data from the bourse shows that no one company was subject to those lending rules as of Tuesday. Instead, three separate entities held positions equaling as much as 120% of other stocks and anyone who wanted to buy or borrow from those companies would have been competing freely against other bidders at a time when supply anxiety is rising fast.
The last time that type of dynamic developed was during a historic squeeze in 2006, when a buying spree early on in China s industrial boom drained LME contract inventories to a near-record low. On Friday, freely available stocks fell to even more critical levels with less than 14,150 tons available in an industry that consumes about 25 million tons annually.
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