Trafigura Copper Deliveries Unwind LME Squeeze as Backwardation Collapses
A 20,000-ton delivery to LME warehouses on Tuesday (2026-08-18) collapsed a week-long London copper squeeze; more deliveries are expected but inventory remains 75% below April's peak.
Trafigura Group and several other traders placed more than 20,000 tons of copper on warrant at LME warehouses on Tuesday (2026-08-18), the largest single-day build in on-warrant stock since April, and the squeeze that had gripped the London market for the past week collapsed. Three-month LME copper futures settled 1.2% lower at $13,986.50 a ton, dragging the rest of the base metals complex with it.2
People familiar with the deliveries said Trafigura was behind a large share of the metal placed on warrant, and traders expect more to follow in the coming days. The market read Tuesday's (2026-08-18) moves as the beginning of an unwind, not its conclusion.2
Backwardation had gripped the London copper market for roughly a week, with spot metal trading at a premium to forward delivery dates in a structure that raised costs for short holders and pressured physical delivery obligations. Tuesday's (2026-08-18) warrant build broke it. But even after last week's (week of 2026-08-10) recovery, LME on-warrant stock remains roughly 75% below its mid-April peak. One large delivery reduces the immediate pressure; it does not restore a depleted inventory position.2
Copper's direction from here is entangled with unresolved U.S. trade policy. The Commerce Department's recommendation on refined copper duties was due June 30 and has still not been published, leaving a proposed 15% tariff for January 2027, rising to 30% in 2028, in limbo. Societe Generale estimates the current Comex premium implies about a 14.6% probability the duty arrives on schedule. ING commodities strategist Ewa Manthey told CNBC that the COMEX-LME spread has increasingly become a gauge of U.S. tariff expectations.2
Physical copper continues to flow into the United States regardless. Shipping data compiled by IHS Markit show about 56,000 tons arrived in the first two weeks of August, roughly the monthly average once July's record 223,000-ton inflow is stripped out. Traders appear to be positioning for a tariff outcome even as futures markets price it at long odds.2
Chinese buyers have pulled back at current price levels. Shanghai inventories have been building toward 80,000 tons over the past several weeks. Copper is up about 13% this year, enough to carry it past half of BHP's full-year revenue for the first time, and demand softness in Asia at these prices limits how quickly the LME market can clear additional metal into final consumption. The divergence between steady Western positioning and retreating Asian buyers leaves the market without a clear directional anchor beyond the next policy move from Washington.2
Trafigura's financial standing gives it the capacity to move metal at scale. The firm posted first-half profits of $4.09 billion for the six months through March, the third-best half-year in its history, and paid out just over $3 billion in dividends — its largest half-yearly payout on record. Total assets rose 40% to $111 billion, lifted in part by commodity price gains and longer cargo voyages resulting from Hormuz shipping disruptions.1
If Trafigura and others follow through with additional LME warrant placements, the cash-to-three-months spread faces further pressure toward contango. If deliveries slow short of what traders are pricing in, an inventory base still 75% below April's peak leaves London copper exposed to another tightening episode before September ends. The Commerce Department's silence on copper duties, now running eight weeks past its own deadline, adds a second variable with no visible resolution date.2