Persistent Imbalance in Copper Supply and Demand: LME Inventories Plunge 32% in a Month, Mining Stocks Face New Upside Opportunities

London Metal Exchange copper prices remain under pressure, with spot premiums surging to their highest levels since 2021. Multiple supply disruptions, combined with rising speculative long positions, are pushing copper prices close to historical records.

On Monday, LME three-month copper futures rose as much as 1.7% intraday to $14,396 per ton, just a step away from the historical high of $14,527.50 set in January this year.

The premium of spot prices over three-month futures once widened to $543.50 per ton, the highest since the market squeeze in 2021. Copper prices have remained above $14,000 per ton for nine consecutive trading days.

Richard Garchitorena, an analyst at Barclays, pointed out in a research note on Monday that the trend of tightening copper supply is expected to continue, and mining stocks have further room for upside.

David Wilson, Head of Metals Strategy at BNP Paribas, also stated that copper prices are "gaining momentum" to break through historical highs, although the market has entered an overbought zone.

Multiple Supply Disruptions Drive Up Spot Premiums

The core driver of current copper prices is the continued tightening on the supply side.

According to Garchitorena's report, Chile's copper production decreased by 6.7% year-on-year from January to June this year, prompting the country's National Copper Commission (Cochilco) to lower its 2026 production forecast by 2.6% to 5.27 million tons.

Mining giant Antofagasta has lowered its full-year production guidance by approximately 5% due to severe weather disrupting operations at its Los Pelambres mine.

Meanwhile, the Gresik smelter in Indonesia halted production, causing delays in cargo shipments, with no confirmed timeline for resumption yet.

Inventory data also confirms the tight supply situation. LME copper inventories plunged 32% from a month ago to 205,000 tons. Garchitorena noted that speculative net long positions increased to 77,123 lots, up 20% from July, indicating sustained bullish sentiment in the market.

This dynamic is directly related to expectations of potential U.S. tariffs on refined copper. According to Garchitorena, Comex copper inventories rose by 8% to 735,000 tons during the same period. Traders are awaiting the final decision on U.S. tariffs on refined copper, causing supplies to continuously flow into the U.S. market, further exacerbating the spot tightness on the LME.

Monthly Delivery Date Approaches, Short Pressure May Further Amplify

According to Bloomberg, this round of short squeeze coincides with the key monthly liquidity node for LME contracts.

Before the delivery date on the third Wednesday of each month, this time window may exert additional pressure on traders holding short positions.

BNP Paribas's Wilson admitted that copper prices have entered an overbought zone, but added:

Given the current tightness in the market, I am not sure if this means anything.

With copper prices approaching historical highs, Barclays' Garchitorena believes that mining stocks have further upside potential.

(Performance of Global X Copper Miners ETF)