``` Multiple bulls "squeeze shorts," London copper "spot price spread" soars to $100! The three major bulls are demanding more spot copper than the total LME inventory. ```
The London Metal Exchange copper market is once again showing signs of short-term spot tightness.
On Tuesday, the LME copper Tom/Next spread surged to $100 per ton, reaching its highest level since the historic supply squeeze in 2021. The spread was still in discount mode in the previous trading session, and the rapid reversal in a short period became one of the rarest extreme fluctuations since 1998.
The Tom/Next spread reflects the price difference between delivery tomorrow and delivery on the next trading day, serving as a core indicator of short-term physical supply and demand in the LME market. Under normal circumstances, the spread usually only reflects limited funding and storage costs and fluctuates slightly.
Analysts believe that for market participants, the surge in the spread directly increases the cost for shorts to roll over contracts before expiry, while also emphasizing that the ability to deliver spot goods in the short term becomes a key variable.
Earlier this month, LME copper prices had already reached record highs, and the market’s sensitivity to supply constraints continues to rise. The latest spread volatility has added new instability to an already tight market structure.
(On January 14th, LME copper price rose to a new high of $13,407)
Contract Expiry Approaching, Concentrated Long Positions Amplify Short-Term Spot Tightness
The LME copper contract expiring on Wednesday once traded at a $100 premium to the contract expiring the following day, a phenomenon known as “backwardation” which usually signals rising spot demand.
After hitting a high intraday, the spread fell back and closed at $20 per ton by noon London time, but overall volatility remained exceptional.
This spread spike occurred with the January LME copper contract about to expire. According to LME data, as of last Friday, three entities together held at least 30% of the outstanding long open interest.
If these positions are held until expiry, they could demand delivery of over 130,000 tons of copper—an amount exceeding the immediately available inventories in the LME warehouse system.
In this structure, the scarcity of short-term deliverable resources is quickly magnified, and the Tom/Next spread becomes a focal point of the market battle between longs and shorts, significantly raising concerns over delivery risk.
Rollover Cost for Shorts Rising, Cross-Market and Inventory Structure Intensifies Volatility
As the Tom/Next spread rises, those holding short positions who choose to roll over will face significantly higher cost pressure.
The LME does have rules requiring large longs, when holding above a certain proportion, to lend physical spot at capped rates to the market to ease short-term imbalance. However, this round of spread spikes temporarily broke through the previous institutional cap of around $65 per ton, indicating that buffer space was quickly exhausted in a short period.
At the same time, the forward structure for copper prices also signals tightness. LME curves maintain backwardation across multiple forward-month contracts, and market pricing for future supply and demand remains tense.
Although total global copper inventory is currently at an acceptable level, uneven distribution means deliverable resources are limited in certain regions, making short-term spreads more sensitive to delivery pressure.
As LME spot prices strengthen, the previous premium of New York Comex copper contracts has narrowed significantly, even switching to a discount recently, and changes in cross-market spreads are prompting adjustments in physical flows.
This week, New Orleans LME warehouses saw small-scale inflows—previously vacant delivery points are once again receiving physical copper.
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