Copper Squeeze: LME Spreads Explode to 28-Year Highs on Supply Panic

The global copper market is in the midst of a violent dislocation. On Tuesday, the LME Copper Tom/Next spread—the cost to roll a position overnight—surged to $100 per ton, the wildest backwardation seen since the late 1990s.

The Mechanics of the Squeeze

The panic is driven by a severe mismatch between paper positions and physical metal availability.

• The Whale: Data indicates three major entities hold long positions equivalent to 160,000 tons of copper expiring in January contracts.
• The Inventory Crisis: This volume exceeds the current accessible warrants in LME warehouses, creating a classic “cornering” of the market.
• Price Reaction: Short sellers are being forced to pay exorbitant premiums to roll their positions or scramble for physical metal, driving spot prices sharply higher.

False Narratives and Corrections

Compounding the volatility, Nvidia quietly corrected a technical blog post that had overstated copper demand for data centers by 2000%. While this correction caused a brief pullback in futures prices, the physical squeeze on the LME remains the dominant driver.

Forex Impact

The squeeze is providing idiosyncratic support to commodity-linked currencies, though the broader risk-off mood is capping gains for the AUD and CAD. Traders should monitor LME inventory data closely; any failure to deliver physical metal could trigger a further explosive rally in copper, potentially decoupling it from the broader economic slowdown narrative.