LONDON: Trafigura Group withdrew a significant proportion of copper that’s been pulled from London Metal Exchange (LME) warehouses, contributing to wild swings in prices, according to sources.

       The drawdown has made the trading house the talk of the copper market, helping to drive available stocks to the lowest since 1974 and pushing a key spread to the highest on record.

       It’s also helped to spur outright copper prices higher, with benchmark futures up about 13% since the start of the month and approaching record highs set in May.

       It’s not unusual for physical traders to withdraw metal from the exchange to ship to their customers, and Trafigura isn’t the only trading house to have taken metal off the exchange in recent months, the sources said. And the move comes against a backdrop of very low inventories globally.

       Still, total requests to withdraw more than 150,000 tonnes of copper from LME warehouses in the past two months have all but drained the available stocks on the exchange, and Trafigura represents a significant proportion of those, the sources said.

       The LME responded to the dramatic moves in copper by adjusting rules governing the market, including by imposing limits on the shortest-term spreads.

       The changes were made “to maintain continued market orderliness and avoid the development of an undesirable situation,” and are intended to be temporary, it said.

       The LME also launched an inquiry into recent trading in copper. Late on Tuesday, it emailed members asking for details about client activity in copper warrants going back to early August, according to sources.

       The exchange took the steps after the spread between copper for immediate delivery and copper for delivery in three months blew out this week to more than US$1,000 (RM4,155) a tonne, the highest on records going back to the 1980s, according to the LME.

       The move in LME stocks shifted the market sentiment over the course of last week, as traders gathered in London for LME Week, said Citigroup Inc analyst Max Layton.

       “The bullish physical sentiment for copper intensified through the week amid the sharp decline in LME on-warrant stock levels,” he said, referring to metal that’s not already earmarked for withdrawal. Prior to this, the physical backdrop to copper had seemed much more benign then the likes of zinc.”

       During the pandemic, Trafigura has emerged as one of the most high-profile bulls in the global copper market, with head trader Kostas Bintas predicting that prices will hit US$15,000 (RM62,314) in the coming years as the industry witnesses a new supercycle underpinned by booming demand in electric vehicles and renewable energy. — Bloomberg