Copper prices on the LME climbed back above $13,000 per tonne on Tuesday as Chinese buyers returned after the Lunar New Year. Their return boosted import demand. The Yangshan copper premium rose to $53/t, a two-month high, up from about $33/t before the holiday.
Demand is improving, but inventories are still high. SHFE stocks remain elevated after the usual seasonal build. LME inventories have also kept rising, so the global market is still well supplied.
Market Structure Signals
LME time spreads are in deep contango, which suggests plenty of nearby supply. For spreads to tighten, the market would likely need clear stock declines in both China and LME warehouses.
There are early signs of demand recovery, but high stock levels could limit near-term tightening. The focus is on whether the import arbitrage stays open and helps pull down LME stocks, alongside faster-than-usual declines in SHFE inventories.
LME COTR data shows funds cut their net long in copper by 3,393 lots to 33,882 lots, the lowest since October 2023. Money managers also reduced their net long in aluminium by 4,486 lots to 92,972 lots, while zinc net long fell by 844 lots to 44,587 lots.
At this time in 2025, the market was dealing with high inventories and speculative selling, even as Chinese demand was only starting to pick up after the holidays. Today, that picture has flipped. LME copper stocks have dropped by more than 60% over the past year to multi-year lows near 75,000 tonnes. That tightening has supported prices, which are now holding above $14,500/t.
Positioning And Strategy
The deep contango seen in early 2025 has shifted to a persistent backwardation. The cash-to-three-month spread is now around an $80/t premium. This points to strong demand for immediate physical metal. The Yangshan premium, now near $110/t, supports that view as China’s clean energy buildout accelerates. Together, these signals suggest demand has moved well ahead of readily available supply.
The caution seen in early 2025—when funds were cutting net longs—has been replaced by stronger conviction. Money manager net longs in copper are now near 85,000 lots. This reflects a crowded bullish view that expects further supply deficits. Heavy positioning can still be a risk, because it can lead to sharp pullbacks if negative news hits.
With a tight physical market and stretched speculative positioning, outright long futures may carry a higher risk of a sudden correction. Traders may prefer call spreads to target more upside with defined risk, while reducing exposure to volatility in a crowded trade. There may also be opportunities in relative value trades, such as long copper versus aluminium, to benefit from copper’s stronger fundamentals while hedging against a broader macro downturn.
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