For the first time in more than a decade, six of the world’s most vital industrial metals are flashing a rare synchronized warning over tight supply, as logistical turmoil and strong demand spark anxiety among buyers.
From aluminum to zinc, spot prices for base metals on the London Metal Exchange are all soaring above futures -- a condition known as backwardation -- for the first time since 2007. Buyers are paying a premium for access to metal against a backdrop of plunging exchange inventories, supply-chain delays, production hiccups and surging demand for industrial commodities in everything from construction to consumer electronics.
In copper and tin, the scale of the backwardations has reached record highs in recent months, exacerbating the sense of panic among industrial users who have been dealing with escalating supply turmoil since the pandemic began.
Signs of tight physical supply across the metals market are also acting as a counterweight to the growing nervousness about the broader macro outlook for major industrial economies, and particularly top commodities consumer China. In the case of aluminum, spreads have tightened significantly over the past month, even as prices slumped from multiyear highs.
Given the diverse uses and supply dynamics for the individual metals, the unusual synchronized tightness across the LME’s six main contracts is a sign of how widespread the logistical turmoil is, and how broad the rebound in demand has been since the early stages of the pandemic, said Oliver Nugent, a base metals analyst at Citigroup Inc.
