The chaos in various global energy markets has spread to the metal market.Global supply tensions escalated sharply on Friday when LME copper stocks on the London Metal Exchange hit their lowest level since 1974.The copper futures spread soared, pushing copper prices to their biggest weekly rise since 2016 (9 per cent) and rebounding to more than $10000 a tonne, about the same as Goldman Sachs Group had forecast for the end of the year.

Copper tracked by LME warehouses fell 89 per cent this month after a surge in metal orders from European warehouses, but has not yet been withdrawn.

According to media reports, the last time this development occurred was during the historic squeeze in 2006, when a buying spree in the early stages of the industrial boom in emerging Asia drained LME's stock of warrants to near-historic lows. The inventory level of LME is even lower than it was then.

Bank of America Corporation, head of metals research, said that if more metals did not enter the exchange, then it was really in trouble.

Earlier, LME, the London Metal Exchange, said on several occasions that it was closely monitoring price fluctuations in the copper market and, if necessary, had options to ensure good market order.

The market order needs to be corrected urgently.

Today, LME finally stepped in, "in order to ensure the order of the copper trading market," the steps include:

1. It will amend the rules of copper loan.

2. Set a limit on the spot premium of the next day's contract

3. Introduce the delayed delivery mechanism to some contracts.

At the same time, LME indicated that these adjustments were temporary and would be reviewed by the Special Committee as appropriate.

Some media analysts said that although the copper price spread is still at an unprecedented level, the reverse spread may also be decoupled the next day, so the above restrictions may help to reduce the carry trade.

The driver behind the chaos in the copper market

The fluctuation of copper price is mainly due to the energy crisis, which may trigger a new round of stagflation.Citi's commodity research team earlier warned that copper demand would shrink over the next three months and copper prices would fall another 10 per cent.

Citigroup Inc metal analysts said that this is an extreme situation, in the entire metal market, an important theme is that consumers want to build their work inventory, which exacerbates tensions.

Media revealed that copper trader Singapore Trafigura Group Trafigura Group played a key role in digesting LME copper inventory.

It is not uncommon for physical traders to extract metal from exchanges for delivery to customers, and Trafigura is not the only trading company to withdraw metal from exchanges in recent months, people familiar with the matter said. The move comes against a backdrop of extremely low global inventories.

Nonetheless, Trafigura accounts for a large part of the total request to extract more than 150000 tonnes of copper from LME warehouses over the past two months, which has almost depleted the exchange's available inventory, according to people familiar with the matter.

This is not surprising because Trafigura became one of the most high-profile bulls in the global copper market during the outbreak, with chief trader Kostas Bintas forecasting copper prices of $15000 over the next few years as the industry witnessed a new supercycle underpinned by booming demand for electric vehicles and renewable energy.

In addition, Trafigura traded 4.4 million tonnes of copper last year, 1 million tonnes more than its biggest rival Glencore Glencore Plc.

The London Metal Exchange said it had begun to investigate the copper trade.

Copper for LME delivery closed down $46 at $10150 a tonne. Shanghai copper closed down 1.90%.