LME copper backwardation begins to narrow; participants mull implications of new measures

Market participants were aloof following the London Metal Exchange's recent measures imposed to rein in the spike in copper spreads, but backwardations have eased, as the Exchange intended.

The LME imposed a series of temporary rules on copper trading on Tuesday October 19. The measures included a limit on tomorrow/next spread orders of higher than 0.5% of the previous day's cash price and a requirement for any party holding a position of more than 50% of LME warrants to lend at 0.25%.
After the rule changes, which came into effect immediately after the LME sent out a notice on Tuesday evening, the cash/three-month spread was trading at an implied $280 per tonne backwardation as of Thursday morning, easing from levels as high as $1,100 per tonne on Monday night.
The cash/November spread was at $200 per tonne on Thursday at around 9am, and the tomorrow/next spread was at a $4 per tonne backwardation at the same time, having flipped to a $1.90 per tonne contango on Wednesday at 12:30pm.


Alice Mason

Ana de Liz

October 21, 2021

11:45 GMT