Copper Hits Record High; Goldman Warns A "Circular Melt-Up" Is Now Driving Global Market
Copper futures on the London Metal Exchange broke out of the post-Thanksgiving trading range and into record-high territory on a massive tariff-driven scramble for supply.
Copper jumped nearly 1% on the LME to $11,294.50/ton, while Comex futures surged 1.6%, blowing out the US-London spread as traders scramble to rush metal into the U.S. ahead of potential Trump-era import tariffs.
The arbitrage continues to pull supply from the rest of the world into the U.S., compounding a year already plagued with unexpected mine outages and tightening fears.
Goldman's commodity specialist, James McGeoch, commented on this dynamic, calling it a "circular melt-up":
Post Thanksgiving – breakout in Copper: Have been watching LME, that $11,100 level, now 3 times, it's felt like a coiled spring, we have seen it in precious this year (Gold, Silver, PGM's), so why not pivot to the Doctor. As we do just remember commodities are highly emotive, basis the touch point at all levels of life, they rarely move in linear fashion, overreact up and overreact down, look at the awakening in Rare Earths in 2025. Whilst the CESCO feedback from a bottom-up perspective was kinda meh (China -8% QTD, y/y, worth noting YTD +7% y/y to end Oct), it's the balances that matter. This wasn't a conference about mine supply, or Chinese Q4 demand, this was dominated by the traders and the desire to purchase and ship into the Comex (U.S.) arb. GS commods sales were on the ground (feedback link), outside China they note EUR demand <2019 and they suggest positioning is 5/10….
I liken this to a "circular melt-up." The tighter LME gets tighter basis US (CMX arb) pull, the stronger the LME backwardation, which in turn tightens the CMX arb as the forward curve is underpinned by stock builds….. Circular motion – LME stock contraction, CMX arb strengthens…. Those watching supply have for some time been looking at 1H26: Grasberg tightness, Kakalua stockpiles rundown, Codelco friction, Collahuasi weakness, QB sustains lower rates. China smelter utilisation rates at record lows, copper premiums at record highs, TC settlement structures are breaking… there is nothing the Chinese can do about it, and in the meantime the U.S. is sitting whistling Dixie as stocks get onshored, it's a strategic stockpile, basis the "threat" of tariffs, that they so desperately need and the traders are providing the balance sheet. Who would have thought 12 months ago that the U.S. would be the only game in town when it comes to copper. By luck or by design, Uncle Sam holds all the aces…. I think last week's move was the hangover of CESCO washing off and traders realising that near term the asymmetry is higher. … Colleagues gone reminded us daily, commodities are spot assets, they are not traded in Excel models, they are art as much as science. Go back to summer, the same traders that owned CMX at 500, sold it at 550/575, the guys that got slammed as the unwind happened were machines. It's these same buyers today stepping in.
Year-to-date, copper is up 30% on the LME as investors pile in – both on the lucrative U.S. arbitrage trade that is fueling shortages elsewhere, and on long-term structural demand from the "Next AI Trade" and major power-grid buildouts.
Commenting on copper markets, super-bull Kostas Bintas of Mercuria told Bloomberg that the U.S. tariff arbitrage is draining global inventories and is about to ignite another leg higher in prices.
"This is the big one," Bintas told the media outlet in an interview during an industry conference in Shanghai. "If the world keeps going like this we will be left without copper cathodes in the rest of the world."
Bintas continued, "Just looking at the facts, mathematically… What is going to happen if all of this continues? There's only one answer: there will be tightness and a higher price."
Last March, Bintas forecasted that copper prices could reach $12,000 or $13,000 a ton, driven by U.S. import drawdowns.
"China is, for now at least, not the marginal buyer," said Nick Snowdon, Mercuria's head of metals and mining research. "That role has now shifted to the US."
Bintas noted, "If we run to $12,000 or $15,000 or whatever it is, the SHFE will take time to catch up. You're going to see a lot of Chinese copper cathodes coming out. And then when the Chinese will come back from Chinese New Year, there will not be enough copper cathodes." He said more than half a million tons could arrive in the U.S. in the first quarter of 2026.
Related:
Earlier this year, Jeff Currie, who led commodities research at Goldman for nearly three decades and now serves as the chief strategy officer of the energy pathways team at Carlyle Group, told Bloomberg's Odd Lots that copper is the "most compelling trade I've seen in my 30-year trading career."
Tyler Durden
Tue, 12/02/2025 – 08:20