By Andy Home

LONDON (Reuters) - Supply, or rather the lack of it, has once again dominated the agenda of the annual CESCO Week gathering of the copper industry in Chile.

As the industry faces an uncertain short-term demand outlook, the CESCO narrative has reverted to the certainty of copper's problematic supply-side dynamic.

And the lack of supply has been the main theme in London copper trading this week as well.

The London Metal Exchange (LME) contract has witnessed the most acute squeeze on availability in over three years.

The benchmark cash-to-three-months period was valued Tuesday at $114 per tonne backwardation. The last time it was anything like that on a closing basis was October 2008.

As ever it has been those shorts caught drinking in the last-chance saloon - that is the LME's "tom-next" spread - who have paid the highest price. It traded as wide as $40 per tonne backwardation at one stage on Tuesday morning.

BIOMECHANICS

The mechanics of what happened this week, which included the prime "third Wednesday" April prompt date, are easily enough explained thanks to the exchange's daily positioning reports.

They showed that as of the Monday close, one player held cash and "tom-next" positions representing somewhere between 50 and 80 percent of available stocks.

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LME copper, the anatomy of a squeeze: Andy Home