Copper Holds Firm as Inventory Build Barely Eases Tightness

Key Moments

Physical Tightness Persists Despite LME Stock Rebuild

ING’s commodities team, led by Ewa Manthey and Warren Patterson, notes that recent inflows into London Metal Exchange (LME) warehouses have eased, but not eliminated, the tightness in the copper market. Over two sessions, available LME copper inventories climbed by more than 55kt, with more than 35kt added in the latest session following an increase of over 20kt previously.

According to the team, the cash-to-three-month spread tightened significantly, with the backwardation shrinking to $176/t after having reached as high as $545/t on Monday. They point out that conditions at the very front of the curve remain constrained, indicating that the market squeeze is still ongoing.

Market Vulnerability and Price Support Factors

The ING analysts emphasize that copper remains exposed to further dislocations after an extended period of inventory drawdowns. They highlight that part of the earlier stock decline stemmed from metal being redirected to the US in anticipation of tariffs.

The team states that they expect copper prices to continue to find support from limited physical availability. At the same time, they caution that any additional warehouse inflows have the potential to alleviate short-term pressure and introduce more price volatility.

Chinese Production Trends Across Base Metals

Data cited from China’s National Bureau of Statistics shows that refined copper production increased by 1.3% year-on-year in July to 1.3Mt. The report attributes this growth to stronger sulphuric acid by-product prices, which improved smelter margins and encouraged higher operating rates.

In contrast, other base metals saw weaker output over the same period. Lead production dropped 7.3% year-on-year to 580kt, and zinc output slipped 0.8% year-on-year to 629kt.

Developments in North American Metals Trade

The report also notes trade discussions affecting other metals. “The US and Canada are reportedly discussing cutting tariffs on certain Canadian aluminium and steel shipments to 25% from 50% as part of a tentative trade deal.”