Mercuria Unloads $500M in LME Copper as U.S. Tariff Fears Spur Short-Squeeze Risk

Mercuria Withdraws Huge Volume of Copper From LME as Prices Soar

Mercuria Energy Group Ltd. has ordered about $500 million of copper for withdrawal from warehouses overseen by the London Metal Exchange, as the trading house positions itself for a global supply crunch fueled by possible U.S. tariffs. The firm was the key party involved in requests to withdraw about 50,000 tons of copper from LME depots on Wednesday, according to people familiar with the matter.

The cancelation of stock was the biggest seen in more than a decade, and it helped drive prices toward record highs above $11,500 on the LME.

Copper pricing dynamics and trade flows have been upended since President Donald Trump in February announced plans to place tariffs on the metal in a bid to boost U.S. supply. The decision caused futures in the New York to spike above those on the LME, and spurred a record surge in U.S. imports as traders including Mercuria, Trafigura Group, and Glencore Plc capitalized on the arbitrage.

The trade was interrupted in late July after Trump unexpectedly spared commodity-grade forms of the metal from tariffs, but in recent weeks trading houses have again been racing to ship more metal to U.S. shores. Crucially, Trump has pledged to revisit plans to impose duties on primary copper next year, and a fresh surge in New York futures has provided another opening for traders to front-load imports before any levies come in.

Why the Standoff Happened

Mercuria's move has intensified supply angst, with companies like Mercuria Energy Trading SA withdrawing significant amounts of copper from LME warehouses in Asia. Anticipated shortages next year, partly due to mine supply disruptions, including accidents in Indonesia and Chile, and accelerating demand growth, have pushed LME copper prices to record highs.

Swiss-based Mercuria canceled or earmarked for delivery more than 40,000 tons of copper in LME storage facilities in South Korea and Taiwan on December 2. At current prices, the value of the copper would be $460 million. Historically low inventories of copper used in the power and construction industries stored in LME-approved warehouses have contributed to a price surge in recent months.

Much of the copper leaving the LME system has gone to the United States, where prices are also elevated because even though copper was given an exemption from import tariffs that came into force on August 1, levies remain under review. Overall, cancelled copper warrants-title documents conferring ownership-on December 2 amounted to 56,875 tons or 35% of total LME stocks.

How Markets Reacted

Mercuria's move helped boost the premium, or backwardation, for the cash copper contract over the three-month forward price. The premium, on an upward path since November, hit $88 a ton on Wednesday, the highest since October 13. This compares with a discount or contango around $35 on November 19. The premium was last around $38 a ton.

Traders expect to see even higher premiums for the cash contract as the settlement date on December 17 approaches, when companies with short positions will need to find copper to deliver against their contracts or roll them forward-known as a short squeeze. Industry sources say cancellations are more common in a contango market, where prices of longer-dated contracts are higher than those for nearby contracts.

What Analysts Are Watching

Kostas Bintas, who joined Mercuria last year to spearhead a rapid expansion into metals markets, told Bloomberg last week he expects prices to push deeper into record territory in the weeks ahead as the trade gathers steam. Bintas said buyers outside of the country could face critical shortages in the first quarter of next year.

Traders routinely take and deliver large volumes of metal from the LME's global warehousing network, which is designed as a market of last resort during periods of shortage or oversupply. The large majority of the metal underpinning the LME's copper contract is of Chinese and Russian origin, which can't be delivered against contracts on New York's Comex.

But there are growing expectations that LME stocks will be drawn down to service customers outside of the U.S., in order to free up additional supply that can be shipped into the country. Traders ordered a further 7,450 tons of copper from LME depots on Thursday.

The U.S. already has a huge surplus of metal in ports and exchange warehouses, but traders and analysts don't expect it to flow back out while Comex contracts continue to trade at a premium, and the threat of tariffs remains.

Analysts at Goldman Sachs Group Inc. said in an emailed note on Wednesday that conversations with physical traders point to a larger-than-expected reacceleration of copper flows into the U.S. in H1 2026. The day's rally was "driven by LME cancellations, which are likely to free up metal to deliver to the U.S.".

Mercuria's actions underscore a broader market shift as traders position for a potential global supply squeeze amid evolving trade policies and production disruptions.