LONDON: Copper prices rose on Friday as traders raced to capture arbitrage opportunities with growing gaps between prices in Chicago, London and Shanghai.
Benchmark three-month copper on the London Metal Exchange (LME) was up 1% at $10,003 a metric ton by 1545 GMT and has gained 16% so far this year.
But that still lagged behind a stellar 21% rise on the Chicago Mercantile Exchange (Comex), allowing producers and traders to profit by selling to the US market.
Latin America, home to the world’s biggest copper producers, has advantages of proximity to the US and exemption from US copper import tax.
Some producers in the region have been able to send more output to the US, yet logistics constraints could limit the quantity. “Traders are willing to pay a premium of up to $300 a ton for May shipment to the US Gulf, but there is no more shipping space,” one producer told Reuters.
The copper rally in Chicago has also outpaced Shanghai. The most traded front-month copper contract on the Shanghai Futures Exchange (ShFE) has gained 15% this year.
Some are looking for ways to re-export copper stocks out of China to capture some arbitrage gains, a trader said. “Chinese traders have been selling imported copper, in particular brands deliverable for Comex since last week.”
In other metals, aluminium dipped on Friday after LME data showed an 88% jump in inventories. The most traded three-month contract for aluminium dropped to $2,527.5 a ton after inventory data was published in the morning.
It was last trading 1.3% down at $2,529.50. Aluminium stocks in LME-approved warehouses rose by 424,000 tons to 903,850 tons on Thursday for the highest level since January 2022.
While increasing inventory usually means relaxed supply and could push down prices significantly, aluminium could be an exception as traders and warehouses cultivate new means to profit from LME’s post-sanction rule change on Russian metals last month.
Behind the latest delivery was Swiss commodity trader Trafigura, which made rent-share deals with warehouses, Reuters reported. “These deliveries have little to do with fundamentals. Aluminium spreads already went to steep contango, suggesting that people were already expecting these stocks to come,” said AMT’s head of reserch, Daniel Smith.
The discount for the cash contract against three-month aluminium was $47.70 a ton, a condition known as contango usually accompanied by relaxed supply. Zinc advanced 0.8% to $2,933 a ton, lead lost 0.2% to $2,229 and tin dropped 1.4% to $32,130. Nickel rose 0.3% to $19,080.
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