Copper shortage warning: Why traders are paying a $370 premium for immediate supply

Copper markets are flashing a warning that physical supplies are getting dangerously tight. Traders are paying a steep premium for metal they can get immediately, while inventories tracked by the London Metal Exchange (LME) continue to fall sharply.

The LME’s front-month copper spread surged to a $370-per-tonne premium on August 14, according to an analysis by The Kobeissi Letter. That is the widest one-month spread since the 2021 copper supply squeeze, signalling that buyers are willing to pay significantly more for immediate delivery than for copper arriving a month later.

The squeeze is even more evident in the broader cash-to-three-month spread. It climbed to $434 per tonne, also reaching its highest level since 2021. Such a market structure, known as backwardation, typically indicates that immediate physical supply is scarce relative to demand.

LME inventories are falling rapidly  

The pressure is being amplified by a prolonged decline in LME warehouse stocks.

Copper inventories have fallen for 42 consecutive days, marking the longest uninterrupted decline since 2014. Stocks have dropped to around 204,975 tonnes, while nearly half of the remaining metal has already been earmarked for withdrawal.

LME stockpiles had climbed above 400,000 tonnes earlier in 2026, but have since fallen dramatically.  That decline matters because exchange inventories represent readily available supplies. When warehouse stocks fall while buyers simultaneously pay large premiums for nearby delivery, it suggests that the physical market is becoming increasingly constrained.

Why the US is making the squeeze worse  

A major factor behind the disruption is the flow of copper towards the United States.

Traders and producers are redirecting refined copper to the US as expectations of tariffs on the metal make American prices more attractive than those in other markets. This creates an arbitrage opportunity: sellers can potentially earn more by moving copper into the US rather than supplying other markets.

The result is a tightening pool of copper available elsewhere, particularly in the LME system.

What backwardation tells us  

In a normal market, copper for delivery several months ahead may trade at a premium because buyers compensate sellers for financing, storage and other carrying costs.

The current situation is the opposite. When near-term copper trades substantially above future delivery prices, it indicates that buyers are competing for metal available now. The sharper the backwardation, the stronger the signal of immediate supply stress.

The $370-per-ton front-month premium and $434-per-ton cash-to-three-month spread therefore provide a stark indication of how aggressively the market is pricing physical scarcity.

Copper is a critical industrial metal used in power grids, electric vehicles, renewable-energy infrastructure, electronics, construction and data centres. A sustained supply shortage can therefore have consequences far beyond commodity exchanges.

If inventories continue to decline and more metal is pulled towards the US, manufacturers elsewhere could face higher procurement costs or longer waits for supplies. Persistent tightness could also keep copper prices elevated, increasing costs across industries that depend heavily on the metal.