LME copper spreads backwardated with stock squeezeThe drawdowns in copper stocks have affected the LME's price movements.
The widening of nearby spreads has been accelerated by the tightening of supply and declining inventories. The cash-to-three-monthly copper spread on the LME has reached a backwardation of $1,153.50/t.
The spread between cash-to-three-month and cash-to-three-month contracts has narrowed since last week, moving to a backwardation level of $338/t on Tuesday's close, and $251.75/t today.
In October, the copper inventory in the London Metal Exchange warehouse system fell to its lowest levels since 1974.
On-warrant copper stocks fell by almost 90% to a fresh low of 14,150t on October 15.
The decline in LME copper stocks has contributed to the significant upward movement in copper prices since the start of the month. On October 18, the three-month copper contract reached a recent high of $10,737.50/t.
Copper stocks have fallen to their lowest levels in over a decade as global demand continues to grow.
The London Metal Exchange (LME) responded to the sharp swings in the copper spreads by introducing new regulations and rules. Among these are a tighter backwardation limit, a deferred delivery mechanism, and a requirement for certain contracts.
The exchange said actions are "intended to ensure market orderliness" and are supposed to be temporary.