ING’s commodities team, led by Ewa Manthey and Warren Patterson, reports Copper market tightness has eased slightly as LME inventories rose by more than 55kt over two sessions, narrowing the cash-to-three-month backwardation. However, they stress Copper remains vulnerable after months of inventory outflows, with expected tariffs and tight physical supply likely to keep prices supported despite potential volatility from further inflows.
LME stock build tempers squeeze
"Tightness in the copper market eased after more than 35kt of metal was added to available LME inventories yesterday, following an increase of over 20kt in the previous session. The cash-to-three-month spread narrowed to a backwardation of $176/t, from as much as $545/t on Monday. However, continued tightness at the very front of the curve suggests the squeeze has not fully run its course."
"The market remains vulnerable after months of inventory outflows, driven partly by the diversion of metal to the US ahead of expected tariffs. We expect copper prices to remain supported by tight physical supply, although further inventory inflows could ease near-term pressure and trigger additional volatility."
"Meanwhile, data from China’s National Bureau of Statistics showed refined copper production rose 1.3% year-on-year to 1.3Mt in July, supported by higher sulphuric acid by-product prices, which boosted smelter margins and encouraged increased operating rates."
"Elsewhere in the base metals complex, lead output fell 7.3% YoY to 580kt, while zinc production edged down 0.8% YoY to 629kt over the same period."
"The US and Canada are reportedly discussing cutting tariffs on certain Canadian aluminium and steel shipments to 25% from 50% as part of a tentative trade deal."
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