Chinese inventories on the Shanghai Futures Exchange have dropped to near multiyear lows of 33,848 tons, providing less than a single day of domestic consumption. A mix of smelter constraints, tight scrap markets, and Congolese supply bottlenecks caused by government crackdowns on illegal mining have intensified the regional squeeze. The crisis has pushed front-month futures spreads to their widest backwardation since 2005. Despite wide arbitrage opportunities, traders are holding back on redirecting American copper inventories due to expected returns from potential US tariffs.
Key points
Global supply disruptions, including truck seizures in the Democratic Republic of Congo,…: Global supply disruptions, including truck seizures in the Democratic Republic of Congo, are exacerbating severe Chinese copper shortfalls.
The front-month spread on the Shanghai Futures Exchange surged into backwardation at leve…: The front-month spread on the Shanghai Futures Exchange surged into backwardation at levels not seen since 2005.
Potential American import tariffs are deterring traders from shipping profitable US coppe…: Potential American import tariffs are deterring traders from shipping profitable US copper inventories to relieve Asian deficits.
Sources checked by our analysis pipeline: 1
Trafigura Group has been buying large volumes of copper to boost sales into Asia as local supplies run low, adding to a scramble for metal that’s pushed regional premiums for spot cargoes to record highs.
The Singapore-based company is one of the biggest traders in the copper market, and over the past two weeks it has approached several producers and traders in Asia requesting to buy large volumes over November and December, according to people familiar with the matter, who asked not to be identified because the discussions were private.
The buying spree has come during a deepening supply crunch in China, where smelters are facing severe constraints on flows of mined ores and scrap. While demand is relatively subdued, buyers have been thrust into a bidding war to secure alternative spot cargoes to make up for shortfalls from domestic suppliers.
Trafigura in particular has been willing to outbid rivals, contributing to a sharp rally in premiums for spot metal across Asia in recent weeks, some of the people said. A spokesperson for Trafigura declined to comment.
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