A record cancellation of London Metal Exchange (LME) copper warrants is pushing the copper market into a more volatile and bullish phase.

According to trading desk reports, JPMorgan's latest metals weekly highlights that a staggering 50,000 metric tonnes of copper warrants were cancelled in LME warehouses this Wednesday—the largest single-day operation since 2013. The bank views this event as marking the "end of the beginning" for the copper bull market, signaling a transition into a "mid-game phase" characterized by heightened volatility and clearer upward momentum.

The unexpected move quickly ignited market sentiment. Boosted by the news, LME three-month copper prices surged 5% over the past week, briefly surpassing $11,500 per tonne on Wednesday to hit a fresh high.

Analyst Gregory C. Shearer and his team argue that the warrant cancellation is not an isolated incident but a direct response to intensifying structural tightness in the global copper market. Behind this lies the persistent "pull" effect of robust U.S. demand for refined copper, which has left other regions facing supply shortages and forced them to turn to LME for spot resources.

This dynamic has slashed LME's "on-warrant" deliverable inventories below the critical psychological and technical threshold of 100,000 tonnes. JPMorgan warns that when stocks fall this low, the market becomes highly susceptible to backwardation—where spot prices exceed futures prices—creating a trading environment with asymmetric upside price risks.

**Root of Imbalance: U.S. Demand Siphoning and Global Inventory Mismatch** The bank notes that while ongoing supply disruptions—such as force majeure at Freeport’s Grasberg mine and Ivanhoe Mines’ lowered 2026 production guidance—have fueled the rally, the core of its bullish thesis rests on severe global inventory mismatches and refined copper being persistently drawn to the U.S. market. This is reshaping global trade flows and pricing mechanisms.

Data shows U.S. copper premiums remain elevated. Despite recent LME price gains, the spread between COMEX and LME contracts remains stark. For instance, the March 2026 COMEX copper contract trades at a $390/tonne premium to its LME counterpart.

This persistent arbitrage window is clearly incentivizing global refined copper flows to the U.S., forcing buyers elsewhere to pay higher prices. Reports indicate Chile’s Codelco is demanding annual premiums as high as $325/tonne or more from major consumers, with particularly sharp jumps in Asian markets.

**Spot Market Emerges as New Battleground Amid LME Inventory Crunch** Sky-high annual premiums are pushing end-users outside the U.S. (e.g., Asia, Europe) to increasingly bypass long-term contracts and seek spot supplies instead.

JPMorgan notes this shift makes LME stocks highly attractive. Even if much of the copper in LME warehouses cannot be shipped directly to the U.S. due to origin-related tariffs or bans, it can be sold to consumers in Asia or Europe at prices more competitive than producers’ steep premiums.

Against this backdrop, Wednesday’s 50,000-tonne and Thursday’s 7,500-tonne warrant cancellations are seen as traders anticipating rising spot demand in Asia and beyond. These concentrated withdrawals have pushed LME on-warrant stocks below 100,000 tonnes—a key threshold historically triggering sharp backwardation spikes.

**Below Critical Threshold: Asymmetric Bullish Setup in Play** Falling below 100,000 tonnes not only signals potential curve structure shifts but could also usher in an "asymmetric bullish pricing regime."

JPMorgan’s analysis of post-2000 data shows that when on-warrant stocks dip below 100,000 tonnes, LME three-month copper prices have risen 57% of weeks with a median weekly gain of 0.64% (versus 51% and 0.06% when above 100,000 tonnes). The signal strengthens further when stocks are both below 100,000 tonnes and declining—as seen this week—with prices rising 64% of weeks and median weekly returns exceeding 1%.

**"Bull Endgame": Squeezes and Arbitrage Reversals** The bank outlines a "bull endgame" scenario where sustained U.S. tariff threats keep non-U.S. refined copper markets tight, depleting LME inventories.

Declining stocks would steepen LME backwardation and lift futures prices. Historically, when on-warrant stocks are below 100,000 tonnes and falling, three-month copper prices have risen 64% of weeks with median weekly returns over 1%.

Ultimately, surging LME prices and backwardation aim to forcibly close the COMEX-LME arbitrage window. At sufficiently high LME levels, copper would flow back from well-supplied U.S. markets to LME or other spot-needy regions, achieving global rebalancing.

**Short-Term Tug-of-War** Despite the clear long-term bullish case, JPMorgan notes near-term "tug-of-war" dynamics. Not all major consumers have fully adjusted to higher prices, with one key region still adapting—potentially offering brief respite.

Opportunistic smelter exports attracted by high LME prices may temporarily replenish stocks, creating a dynamic interplay between trader withdrawals and producer deliveries. However, the bank believes such short-term flows cannot offset broader tightness. Against global supply disruptions and scarcity concerns, LME’s inventory downtrend appears irreversible, reinforcing its call for tighter spreads and higher prices.