The London Metal Exchange copper market is again showing signs of short-term physical tightness. On Tuesday, the LME copper Tom/Next spread surged to $100 per tonne at one point, reaching its highest level since the historic supply squeeze in 2021. Having been in a contango state just the previous trading day, this sharp reversal within a short timeframe represents one of the most extreme volatility episodes seen since 1998. The Tom/Next spread reflects the price difference between tomorrow's settlement and the next trading day's settlement, serving as a core indicator in the LME market for gauging short-term physical supply and demand. Under normal conditions, this spread typically reflects only limited financing and storage costs, exhibiting minimal fluctuations. Analysis suggests that for traders, the soaring spread directly increases the cost for short positions choosing to roll over contracts before expiration, while simultaneously reinforcing the signal that near-term physical delivery capability has become the dominant variable. Earlier this month, LME copper prices had already climbed to record highs, with market sensitivity to supply constraints continuing to rise. This latest spread volatility adds a new element of instability to an already tense market structure. (The LME copper price reached a new high of $13,407 on January 14th) As the contract expiry approaches, concentrated long positions are amplifying the short-term physical tightness. The LME copper contract expiring on Wednesday at one point commanded a premium of $100 over the contract expiring the next day; this phenomenon, known as "backwardation," typically signals rising immediate physical demand. After hitting its intraday peak, the spread subsequently retreated, settling at $20 per tonne by midday London time, yet the overall volatility remained exceptionally high. This loss of control in the spread occurred as the LME January copper contract nears its expiry date. According to LME data, as of last Friday, three entities collectively held long positions accounting for at least 30% of the open interest. If these positions are held to expiry, they could demand delivery of over 130,000 tonnes of copper—a volume that already exceeds the immediately available inventory within the LME warehouse system. Within this structure, the scarcity of short-term deliverable resources is rapidly magnified, making the Tom/Next spread a focal point of the battle between longs and shorts and significantly heightening market focus on delivery risks. Rising costs for short positions to roll over contracts, coupled with cross-market and inventory structures, are intensifying volatility. As the Tom/Next spread widens, traders holding short positions face significantly increased cost pressures if they choose to roll over their contracts. Although the LME has rules requiring large long positions above specific thresholds to lend metal to the market at a capped rate to alleviate short-term imbalances, the fact that this round's spread briefly broke through the previous institutional cap of approximately $65 per tonne indicates that the buffer was rapidly depleted in a short period. Simultaneously, the forward curve for copper is also emitting tightness signals, with the LME curve remaining in backwardation across several forward contracts, indicating that the market's pricing of future supply-demand dynamics continues to tighten. Although global copper inventory levels overall remain at acceptable levels, the uneven distribution of stocks and limited deliverable resources in certain regions make short-term spreads more sensitive to delivery pressures. As LME cash prices strengthen, the previous premium for New York Comex copper contracts has narrowed significantly, recently even turning into a discount; these changes in inter-market spreads are adjusting the flow of physical metal. This week, small inflows were recorded at LME warehouses in New Orleans, with previously vacant delivery points seeing physical metal arrivals once again.