Key Takeaways
- LME copper backwardation hit $543.50 per tonne, the widest spread between spot and three-month prices since the historic supply squeeze of 2021.
- European equity markets showed divergent performance, with the STOXX 600 (SXXP) slipping 0.24% while the FTSE 100 (UKX) edged up 0.1%.
- LME warehouse stocks fell for the 42nd consecutive day, reaching a critical low of 204,975 tonnes, as metal is diverted to the U.S. ahead of potential tariff decisions.
- Copper prices approached record highs, trading near $14,500 per tonne as short sellers scramble to cover positions ahead of monthly contract expiries.
The London copper market is experiencing its most significant supply tension in five years. On August 18, 2026, the one-day spread for copper surged to $110, contributing to a cash-to-three-month premium that reached as high as $543.50 per tonne. This extreme backwardation—where immediate delivery costs significantly more than future delivery—indicates an acute shortage of available metal in exchange-registered warehouses.
Inventory levels at the London Metal Exchange (LME) have plummeted by nearly 50% since May. This drain is largely attributed to traders moving refined copper into the United States to get ahead of anticipated import tariffs from the Trump administration. While global inventories remain relatively stable, the concentration of metal in the U.S. has left the LME system vulnerable to a "bidding war" among short sellers.
Major mining companies are seeing increased volatility as a result of these physical constraints. BHP Group (BHP) recently reported that it expects copper demand to grow by more than 50 million metric tonnes annually by 2050, driven by the energy transition and AI infrastructure. Despite the long-term bullish outlook, the current price spike is being driven more by near-term technical tightness and short covering than a broad surge in industrial demand.
In the equity markets, European shares struggled for a clear direction. The pan-European STOXX 600 (SXXP) declined 0.24%, weighed down by a rise in sovereign bond yields and persistent energy price concerns. Conversely, the FTSE 100 (UKX) managed a slight gain of 0.1%, supported by its heavy weighting in mining and energy stocks that benefited from the firming commodity prices.
Regional performance was impacted by a mix of corporate earnings and macroeconomic headwinds. While software heavyweights like SAP SE (SAP) have seen recent gains due to cooling inflation metrics, luxury and consumer-sensitive sectors faced pressure. Investors remain cautious as they weigh resilient European economic data against the risks of elevated borrowing costs and geopolitical uncertainty in the Persian Gulf.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.