Copper Price Forecast: LME Squeeze Unwinds Toward $6.30

Key Points

• The cash-to-three-month backwardation for LME copper decreased from $535 to $255 as warehouse stocks increased by 15,725 tonnes, indicating a potential unwinding of the squeeze.
• COMEX currently holds approximately 667,200 tonnes of copper, with speculative net length around 911,585 tonnes, suggesting a crowded positioning as the U.S. tariff premium diminishes.
• The bearish base case anticipates COMEX copper prices to reach $6.30 by the September LME expiry and $6.18 in Q4, while a closing price above $6.90 would invalidate this bearish outlook.

Market Analysis

This week, two exchanges presented contrasting narratives regarding copper. On August 17, London copper cash settled at $14,850 per tonne, with a backwardation of $535 over the three-month contract, marking the widest spread since 2021. However, in the following session, the front cracked, with cash prices dropping by $515, and the spread halved to $255. Concurrently, COMEX copper saw a nearly 2% decline, settling at $6.49 per pound.

The article emphasizes that these developments are interconnected and highlights the geographical aspects influencing the London squeeze. The dynamics between the LME and COMEX markets are crucial for understanding the current copper pricing landscape.