Trafigura withdraws huge volumes of copper from LME warehouses

Trafigura Group has moved to withdraw hundreds of millions of dollars of copper from London Metal Exchange warehouses as lucrative trading opportunities emerge in the US and China, according to people familiar with the matter.

The trading house was the main party involved in orders to withdraw more than 51,000 tons of copper from LME warehouses in the US and Asia on Friday, said the people, who asked not to be identified due to the commercial sensitivity of the matter.

The orders — which were the largest seen on the LME since 2013 — come as copper futures on New York’s Comex have surged above prices on the LME, creating a huge incentive for traders to deliver copper into the US.

Comex contracts have been trading at a premium over the LME for most of the past year, due to the possibility that the Trump administration will impose tariffs on the metal. Record volumes of copper were shipped to the country last year as traders cashed in on the arbitrage, and Trafigura’s withdrawal of stock is a sign that the seismic trading opportunity is gaining new momentum.

More than 30,000 tons of metal was ordered out of LME warehouses in New Orleans and Baltimore on Friday, and they’re likely to be delivered into Comex warehouses or to end buyers in the US market, the people said. The trading opportunity exists because Comex copper prices are inclusive of duties, while LME prices aren’t.

Nearly 20,000 tons of copper was also withdrawn from LME warehouses in Asia. While the US could be an attractive destination for some of that metal, rising prices in China are also creating incentives to ship copper there too.

With LME prices trading around $13,660 a ton on Friday, the total value of the metal that’s been ordered from the exchange is more than $700 million. 

A spokesperson for Trafigura declined to comment. 

(By Mark Burton and Jack Farchy)