Demand3 Nov 2021 08:12
Short-term copper contracts are once again trading at a huge premium to futures in London, in a sign that last month’s unprecedented tightness in spot supplies is far from over. While futures prices are tumbling as the outlook for demand deteriorates, surging premiums for spot contracts point to a supply shortfall on the London Metal Exchange, with inventories near a multi-decade low. Premiums for spot contracts hit record levels last month, in a condition known as backwardation that signals spot demand is far outpacing supply. The steep spot premiums and dwindling supplies of metal on the LME and other exchanges stand in stark contrast to mounting worries over demand that are dragging futures prices lower. Three-month prices have fallen about 10% from last month’s peak, fueled by a manufacturing slowdown in China and mounting debt risks in its property sector.
“It is fair to say that there is some sort of storm brewing for the metals,” Malcolm Freeman, a director at brokerage Kingdom Futures, said in an emailed note. “The key question is when will it break