The London Metal Exchange (LME) copper price surged to a record nominal high of $11,104.50 per metric ton on Monday, driven by a short squeeze on the COMEX contract at CME Group. This rally has resulted in traders scrambling to ship metal to CME warehouses in the United States to cover their short positions.
The panic has fueled a 27% rise in copper prices since January, reinforcing a bullish narrative of a market caught between constrained supply and a green demand boom. However, China’s ample copper reserves highlight that the world is not yet running out of the metal.
Shanghai Futures Exchange (ShFE) inventories stood at 291,020 metric tons at the end of last week, compared with LME stocks of 105,900 tons and CME stocks of just 18,244 tons. This year’s seasonal stock surge around the lunar new year holidays has been the strongest since 2020, with ShFE inventory peaking at 300,045 tons in mid-April and remaining elevated.
Weak spot demand, robust imports, and rising domestic output have kept China’s exchange inventories high. Chinese buyers, like their global counterparts, have de-stocked in response to copper’s sharp rally, which likely explains the lack of the usual post-holiday decline in ShFE stocks.
Chinese imports of refined metal have been strong, with 1.25 million tonnes imported in the first four months of this year, up 17% from the same period in 2023. Net imports of 1.18 million tonnes were up 26% year-on-year, reflecting lower exports.
Significantly, imports of raw materials have also increased, with copper concentrate imports rising by 7% year-on-year to 9.34 million tons in January-April. This higher availability has boosted domestic production of refined copper, which rose by 8% in the first quarter and accelerated to 9% in April.
The combination of elevated stocks and high prices has caused a collapse in the Yangshan premium, a key indicator of China’s copper import appetite. The premium is now assessed at minus $5 per ton, the first negative reading since the data series began in 2013. This suggests that the spot import market has closed firmly, although metal will continue to flow into China under annual supply deals.
This situation may provide some relief to CME shorts by allowing shipments of South American copper to be re-routed from China to U.S. ports. However, CME’s list of deliverable brands does not include Russian or Chinese brands, limiting the potential for a direct transfer from the LME.
The copper rally has been driven by fund buyers and exacerbated by trade short positions being forced to cover. Money managers have increased their long positions on the CME contract to a near six-year high of 141,204 contracts, while investment fund long positions on the LME have also reached a record high of 107,385 lots.
This market dynamic has contributed to the upside momentum, with CME shorts playing a significant role. However, if traders can shift copper to CME warehouses and rebuild depleted stocks, the current disconnect between CME and LME pricing will likely close, leaving a larger disconnect between price and supply chain reality. 
