FX.co ★ Copper Holds Near 3-Month High

Copper futures remained above $5 per pound on Wednesday, maintaining levels close to three-month highs due to increasing concerns over potential global supply shortages. Market participants have been actively diverting copper shipments to the United States in expectation of possible tariffs, resulting in significant reductions in inventory at both the London Metal Exchange and the Shanghai Futures Exchange. This development has caused a pronounced backwardation in the futures curve, with on-warrant inventories plummeting by 80% so far this year, and the tom/next spread widening to $90 per tonne. However, analysts have warned that the copper price rally could quickly reverse if demand for US imports diminishes, especially as markets seek clarity on forthcoming tariff decisions. Additionally, copper prices have been bolstered by a strong demand outlook in China. A private survey indicated an unexpected return to expansion in Chinese factory activity in June, suggesting that the world’s largest consumer of copper may be reaping the benefits of the recent reduction in US-China trade tensions.