The copper market is undergoing historic tightness due to rapidly declining inventories, potential U.S. tariff hikes, and a smelter pricing crisis. Chinese smelters are accelerating exports to cover short positions on the London Metal Exchange (LME). Sources reveal that companies such as Jiangxi Copper and Tongling Nonferrous Metals Group plan to deliver at least 30,000 metric tons of copper to LME warehouses in Asia in the coming weeks, with nearly 10 other smelters preparing to export 40,000–50,000 tons.
Chinese smelters typically hedge copper concentrate costs to mitigate price volatility, but failure to deliver physical copper on time could lead to losses due to high spot premiums. Following the export news, the spot premium for copper over the three-month forward contract plummeted from $280 per ton on Monday to just $94 by Wednesday. In May, Chinese-origin copper accounted for 43% (30,825 tons) of LME inventories, down from 59,725 tons in April.
The spot premium (where near-term prices exceed forward prices) signals supply tightness. This year, LME copper inventories have dropped about 80%, falling below a single day’s global consumption. Meanwhile, fears of U.S. tariffs have prompted traders to rush shipments to the U.S. ahead of potential measures, widening the price gap between U.S./UK and Asian copper to as much as $1,000 per ton and further depleting stocks. Despite weak Chinese demand, the export surge could trigger domestic spot premiums within China as well.
China’s copper smelting sector faces overcapacity and fierce competition for raw materials. Some smelters are even paying miners to secure concentrate, driving spot processing fees into negative territory for the first time.
While the LME has recently taken steps to curb spot premiums, data suggests current copper price pressures stem from systemic factors rather than a single trader’s activity.
On Wednesday, COMEX July copper futures traded at $4.88 per pound (~$10,760 per ton), while LME copper stood at $9,703 per ton. The September contract was slightly higher at $4.93 per pound, with the December contract just below $5.00.
