Trafigura has cancelled LME warrants covering 51,000 tonnes of copper, the largest single warrant cancellation by a physical trader in years. The move effectively removes that tonnage from LME exchange-traded inventory, redirecting it to the physical market — almost certainly toward the United States, where copper commands a significant premium on COMEX amid rising tariff uncertainty. (Source: Sora Futures, LME warehouse data)
The scale of the withdrawal is extraordinary by historical standards. By comparison, total daily LME copper trading volumes average roughly 150,000-200,000 tonnes across all contracts, and open warrant cancellations of this magnitude are rare. The last comparable event occurred during the March 2022 nickel crisis, although the copper market is not experiencing the same short-squeeze dynamics. (Source: Sora Futures, LME)
The withdrawal is squarely driven by US trade policy risk. The Trump administration has already imposed a 50% tariff on aluminum imports, renewable every 90 days, and market participants widely expect copper to be the next target. By pre-positioning physical copper in the United States, Trafigura and other traders are seeking to avoid the cost impact of future import duties. The COMEX-LME spread has widened accordingly, with COMEX copper commanding a premium that makes the arbitrage economics compelling.
LME registered copper inventories have fallen to 391,900 tonnes as of May 22, but the more important metric — on-warrant stocks — has declined more sharply. The Trafigura cancellation alone accounts for roughly 13% of total LME inventory. With LME stocks already trending lower due to the broader supply deficit, the withdrawal is accelerating a liquidity crunch that could amplify price volatility in the weeks ahead.
The physical market dislocation has not been confined to LME warehouses. Traders report that the scramble for US-bound tonnage has tightened the Atlantic basin physical market, with cathode premiums rising in Europe as material is diverted westward. Asian premiums remain relatively stable, but traders caution that the dislocation could spread if the tariff threat extends to all non-US origins.
LME copper cash settled at $13,545/t on May 22, supported in part by the warrant cancellation and the broader deficit narrative. The front-month backwardation has widened as available exchange inventory tightens, reflecting the physical squeeze. Market participants are watching LME timespreads closely for signs of a more aggressive backwardation that would signal intensifying deliverability concerns.
The US tariff trajectory remains the key variable. The aluminum tariff includes a renewable clause every 90 days, and there is no official announcement on copper tariffs yet. However, the market is pricing in a high probability of action before year-end, and the physical repositioning of material into the US is likely to continue as long as the policy uncertainty persists. (Source: Sora Futures)
Expect continued COMEX premium over LME as tariff hedging drives physical flows. For US buyers, consider fixed-price contracts on a COMEX basis rather than LME-linked pricing to avoid basis risk. Horizon: 3-6 months. Key trigger: any official announcement of copper tariff investigations would immediately widen spreads further — lock pricing immediately if that occurs. For non-US buyers, LME exposure carries increasing deliverability risk if cancellations continue at this pace.