Copper prices hit all-time high
What's the story
Copper prices have surged to an all-time high on the London Metal Exchange (LME), following a weeks-long rally. The spike is largely due to speculation that US President Donald Trump may extend tariffs to refined metal imports. The benchmark three-month futures on the LME rose by as much as 0.8% to $14,533 per ton, surpassing January's record before paring some gains.
Market dynamics
Long-term supply-demand imbalance driving copper price surge
Copper's 17% rise this year, and a staggering 47% in the last 12 months, can be attributed to a long-term supply-demand imbalance.
Aging mines are struggling to meet demand from data centers, renewable energy sources, and power grids.
However, short-term factors like speculation of US tariffs on primary copper imports have also contributed to this price surge.
Trade impact
Traders betting on higher prices have led to inventory concentration
Traders have shipped hundreds of thousands of tons to the US this year, hoping to cash in on higher prices.
While global stockpiles are high, they are heavily concentrated in the US as metal in LME's global network has dwindled.
This has affected short-term availability, pressured short-position holders, and contributed to record-high prices even amid lukewarm demand conditions.
Inventory impact
Tariffs impact global inventories, leading to a critical squeeze
The tariff trade has taken a toll on global inventories, resulting in a major squeeze on the LME last month as stockpiles underpinning trading in its copper contracts fell to critically low levels.
Although fresh deliveries have eased some strain, spot prices continue to trade at a steep premium to three-month futures on the LME.
This condition, known as backwardation, indicates demand is outstripping supply.