COLUMN-Copper spreads, a bear anomaly in a bullish market – by Andy Home (Reuters U.K. – March 2, 2018)

LONDON, March 2 (Reuters) – The London Metal Exchange (LME) copper price has risen 26 percent since the start of January 2016. That month saw a five-year downtrend bottom out at $4,318 per tonne. Three-month copper on Friday was trading above $6,900.

The lift in price has been part of a broader revaluation of the base metals complex but also reflects specific concerns about the potential for supply disruption to mined production and scrap flows this year. What’s curious, however, is the movement in LME copper time-spreads over the same period.

The benchmark cash-to-threes period CMCU0-3 was pretty much flat back in January 2016. As of Thursday’s close it was valued at a contango of $35.50 per tonne. Barring two flips into backwardation, one in September and one in December 2016, the trend has been one of widening contango.

There’s no cast-iron rule that rising prices must be accompanied by tightening time-spreads, but the level of copper contango is still an increasingly anomalous bear signal in a generally bullish picture.


Within the broader pattern of loosening time-spreads on the LME copper contract, one period stands out. In September last year the LME cash-to-three-months contango flexed out as wide as $60 per tonne, a level unseen in at least a decade.

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