A substantial inflow of physical copper into London Metal Exchange warehouses has unwound the tight supply conditions that have gripped the market in recent days. Trading houses, including Trafigura Group, delivered more than 20,000 tons of copper to LME warehouses, marking the largest single-day increase in on-warrant inventory since April. The influx immediately pressured the market's pricing structure, with the cash-to-three-month spread—a key indicator of supply tightness—collapsing to $248 per ton from as high as $545 per ton on the preceding day.
The dramatic reversal highlights the sensitivity of copper markets to physical supply flows. The $545-per-ton backwardation posted Monday represented the widest spread observed since 2021, signaling severe near-term supply constraints. Industry participants, according to trading sources, attributed a significant portion of the warehouse deliveries to Trafigura, with expectations that additional metal releases could materialize as the squeeze unwinds further.
The copper market's rapid shift underscores ongoing volatility in base metal trading as participants balance supply uncertainty against industrial demand. The movement from an exceptionally tight market to one showing early signs of relief demonstrates how physical inventory decisions by major traders can quickly reshape pricing dynamics across the sector.