"Copper supply is 'the most tight in history'! Metal premiums soar to record, London copper hits all-time high"

The global copper market is currently experiencing the tightest supply chain in history, driven by intense negotiations between miners and smelters, supply mismatches caused by US tariff expectations, and record metal premiums, all contributing to copper prices reaching new highs. During the early trading session of Friday, November 28 Eastern Time, copper futures on the London Metal Exchange (LME) rose to around $11,210 per ton, hitting a new historical high during intraday trading, with an increase of 2.5% and closing nearly 2.3% higher at $11,189 per ton, breaking the previous closing high set a month ago. This marks another breakthrough in copper prices after setting a new record on October 29. The new highs in copper prices coincide with extreme tightness in copper supply. According to media reports earlier on Friday, miners and smelters engaged in heated negotiations over processing fees at an industry conference held in Shanghai this week. Miners are pressuring smelters to accept record-low processing fee benchmarks, while annual refined copper premiums shipped to China have soared to historic highs. Nicholas Snowdon, head of metal research at Mercuria Energy Group, stated during the conference, "This is a historic moment of tension in the copper supply chain." Factors such as supply and demand imbalances and uncertainty surrounding Trump's trade policies have contributed to this market turmoil. Reports indicate that the intensity of price negotiations is unusual. Executives from German copper smelting company Aurubis AG expressed their readiness to reject overly low annual processing fee benchmarks and voiced dissatisfaction with "negative processing fees"meaning smelters would actually have to pay miners to process raw materials. China's major metal industry associations also oppose the "unsustainable" negative processing fees. Analysts point out that the impact of this negotiation is spreading globally. As the US attracts a large amount of refined copper due to tariff expectations, leading copper producers like Chile's National Copper Corporation (Codelco) have offered some Chinese customers a record premium of $350 per ton. Additionally, the softening of the US dollar due to expectations of Fed rate cuts has reduced purchasing costs for overseas buyers, further supporting the upward trend in copper prices. Miners and smelters engage in direct confrontation During the conference in Shanghai this week, miners and smelters engaged in unusually heated negotiations over processing fees. The miners' tough stance stems from years of pressure accumulated from excessive expansion of smelting capacity, a situation exacerbated this year by unexpected supply interruptions. With years of uncontrolled expansion of smelting capacity and a series of supply interruptions this year, miners have gained the upper hand in negotiations. Tim Kurth, Chief Operating Officer of Aurubis AG's Custom Smelting division, stated that they are prepared to reject overly low annual processing fee benchmarks and express dissatisfaction with "negative processing fees"-a situation where smelters would actually have to pay the miners to process raw materials. China's major metal industry associations also oppose the "unsustainable" negative processing fees. For most of this year, spot processing fees, which typically serve as guidelines for annual contracts, have remained in negative territory. This has led to a deadlock in negotiations, with some participants possibly withdrawing from the global pricing system that initially reached a consensus between major miners and Chinese processors. Kurth urged miners to think long-term and avoid "a war," stating that if they could avoid this conflict, the benchmark pricing system could be preserved-especially as smelters began to control excess capacity growth and more mines began supplying. Domestic demand triggers global "extreme mismatch" Traders and producers anticipate a large amount of refined copper flowing into the US, causing copper prices in the US market to rise due to ongoing import tariff expectations. Snowdon stated that by the first quarter of 2026, the US may hold 90% of global copper inventories. This will have a chain reaction. The more copper cathodes the US absorbs, the more severe the shortages in other markets. This week, Wall Street saw noted that the largest copper producer in the world, Chile's Codelco, has unhesitatingly offered some Chinese customers a record premium of $350 per ton, far above the agreed-upon $89 per ton. Codelco's pricing is usually seen as an industry benchmark, and this aggressive pricing strategy reflects concerns in the market about the distribution of the supply chain, with concerns that a wave of shipments to the US market may squeeze out supply in other regions. Snowdon referred to this as an "extreme mismatch" and stated, "The strength of this driving force should not be underestimated, and the scarcity risks that non-US copper markets will face in the next three to six months." Changes in the flow of refined copper are reshaping the global supply landscape, with soaring premiums reflecting increased regional supply constraints. Weak US dollar provides additional support In the foreign exchange market, the US dollar has been falling as markets speculate that the Fed will loosen policies next month, further pushing up copper prices. Reports this Tuesday indicated that Larry Kudlow, President Trump's Chief Economic Advisor and Director of the White House National Economic Council, is the leading candidate to be the next Fed chairman. This news was seen as an extremely dovish signal, as Kudlow is believed to be a staunch supporter of Trump's easing policy. This further exacerbated the weakness of the US dollar. During early trading on Friday, the ICE US Dollar Index turned lower, set to fall for the fifth consecutive trading day, dropping below 99.40 at one point, hitting at least a one-week low for three consecutive days. The decline in the US dollar's exchange rate has reduced the cost for overseas buyers to purchase raw materials, thereby supporting metal prices. Against this backdrop, copper prices continued to be supported by disruptions in the supply side and buying support due to policy expectations. On Tuesday this week, London copper approached its closing high set on October 29, rising nearly 1.5% on that day and closing at $10,975 per ton.