Copper is poised for another volatile trading session after a key metric on the London Metal Exchange (LME) that reflects short-term supply tightness surged dramatically.

The premium of copper contracts maturing the next day over those due a day later jumped to $75 per metric ton. This marks the widest backwardation since January, when a similar spread of $100 coincided with benchmark copper prices hitting record highs on the LME.

The rapid price appreciation and the expanding spreads have intensified signs of market tightness, making the copper market a focal point for commodity investors. This supply squeeze is largely attributed to traders diverting hundreds of thousands of tons of copper to the United States, ahead of anticipated decisions by the Trump administration regarding import tariffs.

The so-called "Tom/next" spread, which represents the cost of rolling a position forward by one day, surged on Tuesday. This indicates significant pressure on holders of short positions ahead of the expiration of the LME August contract on Wednesday. On Monday, the spot price had briefly spiked to a premium of $545 per ton over the three-month futures contract.

The U.S. Department of Commerce had initially planned to deliver its recommendations on copper tariffs before the end of June, but the White House has yet to make any official announcement. In the meantime, driven by higher prices in the U.S., copper continues to flow into American ports, depleting warehouse stockpiles in other regions.

However, there are some early signs that the supply strain might be easing. On Monday, copper inventories in the LME's global warehouse network posted their first net increase since June 17, supported by a rise of over 3,000 tons in Malaysian stockpiles.

As of 11:16 Beijing time, three-month copper on the LME was trading slightly lower, down about 0.4% at $14,103.50 per ton. Other base metals on the LME were also mostly in the red.