50,000 tons of warehouse warrants canceled in one day! JPMorgan: Marks copper prices entering a "more volatile, more aggressively bullish mid-phase."

A record cancellation of copper stock at the London Metal Exchange (LME) is pushing the copper market into a more volatile and bullish phase.

According to Chase Trading Desk, the latest metals weekly report from JP Morgan shows that this Wednesday, a copper warrant totaling 50,000 tonnes was canceled at the LME warehouse, the largest single-day operation since 2013. The bank regards this event as “the end of the beginning” of the copper bull market, implying the market is now entering a more volatile and clearly upward “mid-game phase.”

This sudden incident has quickly ignited market sentiment. Boosted by this, the LME three-month copper contract price rose 5% over the past week, breaking through $11,500 per tonne on Wednesday and reaching a new high.

Analyst Gregory C. Shearer and his team believe this cancellation is not isolated, but a direct response to the mounting structural tension in the global copper market. Behind this is the continuous strong “pull” effect from the US market for refined copper, leading to supply shortages in other regions and forcing buyers to turn to the LME for spot resources.

This development has caused LME “on-warrant” deliverable stocks to plunge to a psychologically and technically critical level: below 100,000 tonnes. JP Morgan warns that when inventory falls this low, the market is prone to enter a “backwardation” state, where spot prices are higher than futures, creating a trading environment with asymmetric upside risks.

The roots of supply-demand imbalance: US demand siphon & global inventory mismatch

The bank notes that while ongoing supply disruptions have fueled the bull market—such as Freeport’s Grasberg mine declaring force majeure and Ivanhoe Mines lowering its 2026 production guidance—the core of its bullish view lies in the severe mismatch in global inventories and the continuous pull of refined copper toward the US market. This dynamic is reshaping global copper trade flows and pricing mechanisms.

Data shows US copper prices remain at a hefty premium. Although recent LME prices have risen, the spread between CME (COMEX) and LME remains significant. For example, the March 2026 COMEX copper contract is priced about $390/tonne higher than the corresponding LME contract.

This persistent arbitrage opportunity is clearly incentivizing refined copper flows toward the US. Directly, it means buyers in other regions must pay higher prices to acquire copper resources.

News reports indicate that Chilean state copper company CODELCO has quoted annual long-term contract premiums at $325/tonne or higher to key consumption hubs, with particularly sharp jumps in the Asian market.

Spot market becomes the new battlefield, LME stocks in crisis

High annual contract premiums are causing end consumers outside the US (such as in Asia, Europe) to forego locking in high-priced long-term contracts and instead seek spot market supply.

JP Morgan’s analysis shows that this shift makes LME copper stocks especially attractive. Even if most LME warehouse copper, due to origin issues (such as US tariffs or bans), cannot be shipped directly to the US, these stocks can be sold to Asian and European customers at prices more competitive than the high long-term premiums quoted by producers.

In this context, the cancellation of 50,000 tonnes of warrants on Wednesday and 7,500 tonnes on Thursday is seen as traders anticipating increased spot demand from Asia and other regions. This concentrated intent to take delivery has pushed LME on-warrant stock below 100,000 tonnes.

JP Morgan stresses this is a critical threshold—historically, once stocks fall below this level, spot “backwardation” premiums have tended to widen sharply.

Below the key threshold: Asymmetric bullish pattern already formed

On-warrant stocks dropping below 100,000 tonnes not only signal a structural change in the futures curve, but could also push copper prices into an “asymmetric bullish pricing mechanism.”

JP Morgan reviewed data since 2000 and found that when on-warrant stocks are below 100,000 tonnes, the weekly probability of LME three-month copper price gains is 57%, with a median weekly rise of 0.64%. In comparison, when stocks are above 100,000 tonnes, those figures are 51% and 0.06%, respectively. When inventory is below 100,000 tonnes and declining, the bullish signal is even stronger.

Sharp expansion of backwardation: Historical charts show that when deliverable stocks are below 100,000 tonnes, the spot price premium over three-month futures tends to “surge sharply.” Currently, the spot-to-three-month futures spread turned into backwardation in mid-November, with plenty of room for further increases.Asymmetric bullish pricing mechanism:

Since 2000, when LME deliverable stocks are below 100,000 tonnes, in 57% of weeks LME three-month copper prices rise, with a median weekly gain of 0.64% (compared to stock levels above 100,000 tonnes, with a 51% up-week ratio and a 0.06% median gain).

When stocks are below 100,000 tonnes and continue to decline week-on-week (as seen this week), the bullish signal is even stronger: the proportion of up-weeks rises to 64%, and the median weekly return exceeds 1%.

"Bull market endgame": Spot squeeze and arbitrage reversal

JP Morgan’s report outlines the current copper market “bull-market endgame” scenario. As long as the threat of US tariffs on refined copper persists, the logical chain is clear: tightening refined copper markets outside the US lead to LME inventory depletion.

The stock drawdown will steepen the LME spot backwardation structure and drive LME futures prices higher. According to data since 2000, when LME deliverable inventory is below 100,000 tonnes and continues to fall, the weekly probability of LME three-month copper price gains reaches 64%, with a median weekly return over 1%.

Ultimately, the surge in LME prices and spot premiums aims to “forcefully reverse” the open COMEX-LME arbitrage window. When LME prices are high enough, this will incentivize copper to flow out from the well-supplied US market, back into the LME system or to other regions in greater need of spot copper, restoring global market balance.

Short-term tug of war: Market still in flux

Although the long-term bullish logic is clear, JP Morgan also points out that the market remains in a short-term “tug of war.” Not all major consumption markets have caught up with copper’s price surge. The report notes that a key consumption area is still adapting to high copper prices, which may offer the market some breathing room.

Against this backdrop, certain smelters may be lured by high LME prices and opportunistically export, replenishing LME stocks. Thus, there is a dynamic game between traders’ delivery-taking (warrant cancellations) and producers’ deliveries.

However, JP Morgan firmly believes that such short-term export activities cannot bridge the overall tightness in supply. Given ongoing global supply disruptions and looming resource scarcity concerns, the downward trend for LME inventories is hard to reverse in the long run. Therefore, the bank remains confident in its view on LME copper spread convergence and rising prices.

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The above highlights come from Chase Trading Desk.

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