The great copper squeeze isn’t over yet

Short-term copper contracts are once again trading at a huge premium to futures in London, in a sign that last month’s unprecedented tightness in spot supplies is far from over. 

While futures prices are tumbling as the outlook for demand deteriorates, surging premiums for spot contracts point to a supply shortfall on the London Metal Exchange, with inventories near a multi-decade low. Premiums for spot contracts hit record levels last month, in a condition known as backwardation that signals spot demand is far outpacing supply. 

As was the case during the October squeeze, buyers on the LME are again paying huge premiums to roll forward front-month contracts. The spread between and November and December contracts spiked to $275 a ton at the close of trading on Monday, in one of the biggest backwardations ever seen on the bourse.