Spot vs futures: what the price of copper means
The spot price is the price of a commodity available for immediate or near-immediate delivery; a futures price is a price agreed today for delivery in a stated month. Both describe the same physical good, and they are held together by the fact that a futures contract can end in delivery of that good.
When a headline says copper costs a certain amount, it almost always means the London Metal Exchange cash price for grade A cathode: refined metal, in a plate of specified purity, sitting in an approved warehouse. It does not mean ore, concentrate, scrap or wire. The distinction is not pedantry. Different links in the chain trade at different prices, and none of the others is the number that gets quoted.
How are the two prices held together?
Think of the futures market as a promise queue with an exit. A futures contract is a standardized agreement to exchange a defined quantity and grade on a defined date, traded on an exchange that stands between buyer and seller. Anyone holding one can leave by taking the opposite position; the exchange nets them out and the obligation vanishes. Most participants leave this way, so the queue mostly empties into cash rather than metal.
What disciplines the price is the small share that does not leave. On the last day, a futures contract is a claim on the physical commodity at a named delivery point. If the futures price sat above the spot price at that moment, a trader could buy metal in the warehouse, deliver it against the contract and pocket the difference risk-free. Selling into that trade pulls the two prices together. This forced meeting at expiry is called convergence, and it is why a futures quotation for a month that has not arrived still tells you something about the physical market.
Before expiry the two can drift apart. The gap between a cash price and the futures price used to hedge it is the basis. A smelter that holds metal and sells futures against it has swapped price risk for basis risk: it no longer cares whether copper doubles, but it does care whether its local premium widens. That swap is hedging, and it is the original purpose of the futures market.
The mechanics of the last week of a contract’s life, including notice periods and warehouse warrants, are covered in how a futures contract settles.
Schematic: the possibility of delivery forces the futures price to meet the spot price, which is why a price for a month that has not arrived still describes the physical market.
A worked example
In August 2026 the World Bank Pink Sheet quoted the London Metal Exchange cash price for grade A copper cathode at $14,326 per tonne, the highest monthly figure in a series that starts in January 1960. Twelve months earlier, in August 2025, the same series stood at $9,670 per tonne, so the cash price was 48.1% higher over the year.
That number describes one specific thing: refined cathode, on warrant, settled against the exchange. Now walk back up the chain. World mine production of copper, measured as metal content, was 23 million tonnes in 2025, with Chile at 5.3 million tonnes, or 23.0% (USGS Mineral Commodity Summaries). Refined production was larger, at 29 million tonnes in the same year, with China at 14 million tonnes, or 48.3%, because refineries process imported concentrate as well as domestic ore.
A mine does not receive $14,326 per tonne. It sells concentrate, and the smelter deducts a treatment charge for turning that concentrate into metal. The scale of that trade is visible in customs data: world exports of copper ores and concentrates were $105.9 billion in 2024, of which Chile shipped $31.0 billion, or 29.3%, and China imported $66.2 billion, or 62.5% (CEPII BACI). So the same month can contain a record cash price for cathode and a quite different economics for a mine, depending on where treatment charges stand.
The copper price page carries the monthly series, and the copper commodity page sets out the mine-to-cathode chain.
Why one commodity has several prices
Three separations do most of the work. Time separates spot from futures. Form separates ore from concentrate from cathode. Place separates one delivery point from another, which is why crude oil has more than one benchmark: the Pink Sheet quoted Brent at $90.90 per barrel, WTI at $82.70 per barrel and Dubai Fateh at $79.70 per barrel in August 2026, three prices for oil in the same month.
Each of those gaps is traded in its own right. A refiner cares about the spread between crude grades, not the absolute level. A merchant cares about the basis between a cargo and the exchange. A producer hedging next year’s output cares about the shape of the forward curve, which is the subject of contango and backwardation. The single quoted number is the reference the others hang from, not the price anybody actually pays.
Frequently asked questions
What is the difference between spot and futures prices?
The spot price is what a buyer pays for a commodity available for immediate or near-immediate delivery. A futures price is agreed today for delivery in a stated future month. Both refer to the same commodity, and the two converge as the futures contract approaches expiry.
What does the price of copper actually refer to?
Usually the London Metal Exchange cash price for grade A cathode, which is the quotation the World Bank Pink Sheet publishes. It stood at $14,326 per tonne in August 2026. It refers to refined metal in an approved warehouse, not to ore, concentrate or scrap.
Why do futures and spot prices converge at expiry?
Because at expiry the futures contract becomes a claim on the physical good. If the two prices differed at that moment, a trader could buy the cheaper one, sell the dearer one and settle both against the same metal. That trade removes the gap.
What is the basis?
The basis is the difference between a local cash price and the futures price used to hedge it. A hedger who sells futures against physical inventory is left holding basis risk rather than price risk, which is normally much smaller but does not disappear.
Do most futures contracts end in delivery?
No. Most positions are offset before expiry by taking the opposite trade, so cash changes hands and metal does not. Physical delivery still matters because the possibility of it is what forces the futures price to track the physical market.
Does a copper miner receive the exchange price?
Rarely in full. A mine selling concentrate is paid for the contained metal at the exchange reference price less treatment and refining charges, which compensate the smelter. In 2024 China imported $66.2 billion of copper ores and concentrates, 62.5% of the world total (CEPII BACI).
Related
- contango and backwardation
- how a futures contract settles
- benchmarks explained
- who trades commodities
- what is a commodity
- Where does copper come from?
- Where does crude oil come from?
- Glossary: spot price
- Glossary: futures contract
- Glossary: basis
- Glossary: hedging
- Glossary: settlement
- Glossary: treatment charge