The London Metal Exchange took action to calm turmoil in the copper market late on Tuesday by introducing temporary limits on some prices, after a plunge in stocks of the metal in its warehouses disrupted trading. The LME said it would adjust its rules requiring large holders of the metal to lend it back to the exchange. It also said it would bring in a limit on backwardation — a scenario whereby spot contracts trade at a premium to futures contracts, indicating that the market is undersupplied. Robust demand and rising copper prices pushed inventories of copper on the LME to their lowest level since 1974 this month. Stocks stand at 15,225 tonnes, compared with more than 200,000 tonnes as recently as September. That in turn has pushed spot prices to record highs versus future prices of more than $1,000 a tonne this week. “We see this as a shot across the bow of trading firms in copper, and is likely to mean that the extreme cash price level seen yesterday is unlikely to be repeated,” Colin Hamilton, an analyst at BMO Capital Markets, said. Copper prices have risen 12 per cent over the past month and are trading close to their 10-year high of $10,748 a tonne reached in May, as demand remains strong in China, the world’s largest consumer. Unlike most futures exchanges, the LME’s contracts are based on physical metal that sits in its network of warehouses, which stretch from Rotterdam to Malaysia. But large requests to withdraw metal over the past month have left extremely low levels of copper stocks on the exchange, which threatens the LME’s connection to the physical market. This week backwardation on the copper contract reached $1,104 a tonne, a record high. Commodity trader Trafigura has been behind the requests to withdraw the metal, Bloomberg reported on Monday. Trafigura said the metal was for its customers. “In a very tight copper market with strong demand outstripping available supply, Trafigura has drawn down inventory to deliver it to end users, primarily in major consumption areas in Asia and Europe,” it said. “This is during a period of heightened risk of supply disruptions and bottlenecks in shipping.” The LME said on Tuesday it would also allow those with short positions in copper to delay delivery of the metal to settle their positions. All of the changes would come into effect immediately and were designed to be temporary, it said. The exchange is owned by Hong Kong Exchanges and Clearing. “These changes are intended to ensure market orderliness and continued liquidity, and the exchange believes they represent a balanced approach in respect of all market participants,” the LME said. Copper was last trading at $10,026 a tonne on Wednesday……