Sharp rise in copper prices doesn't indicate supply shortage risks

In recent days, the London Metal Exchange is showing signs of emerging copper deficit. This is indicated by a surge in premiums on contracts of the metal with immediate delivery compared to contracts for a later date. Thus, by Tuesday, this value for the most traded 3-month contract reached the highest mark since 2021.

According to Tu Lan Nguyen of Commerzbank AG, the reason for this is still the high demand for supplies in the US due to tariffs, which threatens to deplete the warehouses of exchanges in London and Shanghai. At the same time, stocks of the red metal in the US trading platforms' warehouses remain sufficient.

As Nguyen warns, the observed tensions in the copper market could come to an abrupt halt if demand for US shipments declines. It is the uncertainty of Donald Trump's trade policy, rather than a steady increase in demand, that is now affecting the copper market, the expert emphasizes. He does not exclude ending of this trend after clarification of the situation with tariffs.

At the same time, according to estimates of the International Copper Study Group, despite the global supply deficit recorded in April, a surplus of this metal is expected throughout the year.