A drop in Copper stocks on the LME has impacted the market, pushing the spot price for a ton over $10,000. The premium on the 3-month contract is now nearly $380, the highest level since 2021. New measures from the LME appear ineffective as the rise in spot price is linked to increased buying in the US due to potential tariffs. There are also long-term supply concerns, as some Copper smelters face negative processing fees. Chinese smelters are reportedly negotiating long-term contracts with slightly positive processing fees. This development reduces concerns about the end of China’s Copper boom. Currently, there is a tight supply of Copper, with LME inventories dropping to surprisingly low levels. This quick depletion has caused the spot price to exceed $10,000 recently. It’s common for short-term prices to rise when stocks are low, but this time, the 3-month premium is also spiking, sitting at $380 per ton—much higher than usual since 2021. Such a premium indicates a significant gap between current supply and future availability. So far, LME responses, like changes in warehouse reporting and delivery terms, have not effectively changed market sentiment or slowed price increases. The issue seems linked to real-world demand, especially in the US. Increased chatter about new tariffs has led to more forward buying from manufacturers and distributors looking to avoid potential import costs. This surge has ripple effects worldwide, prompting traders to reassess logistics and stock flows into North America. It’s not just about hedging anymore; what began as tactical protection is now influencing price movements in both OTC and listed markets. On the production side, smelters face squeezed margins, particularly those dependent on imported concentrates. Reports indicate that some deals have been made at negative treatment charges, meaning some facilities are accepting losses to keep operating. This trend isn’t sustainable and raises concerns about whether production can meet rising demand. However, traders paying attention to processing fees may have noticed subtle shifts in risk over the past week. News from China suggests that smelters are securing longer-term contracts at slightly positive yields. While these aren’t great deals, they are better than losing money, indicating a shift in expectations. This creates a more stable base for long-term supply from Asia, easing fears of a decline in capacity. For now, the key takeaway is that the market is compressed, with stress focused on the short term. Volatility has shifted to spot prices and has not yet expanded into the overall market structure. Given current fundamentals showing a stock deficit and steady overseas demand, we are adjusting our strategies accordingly. Reaction times are tightening. Use them wisely.

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