Weekly Blog: Copper Hits Record Above $11,000 on Bets That Shortage Looms

  • Copper prices hit all-time highs in both London and Shanghai driven by a combination of factors including China’s property stimulus, robust industrial demand, a short squeeze on the Comex exchange, and heightened bets on tighter market output. This surge in demand pushed the red metal’s prices past the previous record set in March 2022. Furthermore, increasing optimism regarding lower interest rates and stricter sanctions on Russian metal exports contributed to the buying frenzy in copper.
  • The biggest boost to copper came from a short squeeze on the Comex exchange last week. Trafigura and IXM are buying physical copper to cover large short positions on the CME, where copper prices hit record highs. Traders were also racing to procure copper supplies for delivery on the July contract.
  • Stimulus measures in China, the world’s biggest copper importer, also boosted bullish bets. The country drastically loosened restrictions on its property market to help boost the sector and began a massive 1 trillion yuan ($138 billion) bond issuance last week.
  • Relaxed mortgage regulations by banks, as well as plans by local governments to purchase some apartments, contributed to the bullish sentiment in the copper market.
  • Codelco’s output dropped by 10.1% to 107,300 metric tons. Antamina, the second-largest copper mine in Peru, is preparing to commence a delayed project intended to extend the mine’s operational life.
  • SHFE copper inventory inflows continued but slowed, with 644 metric tons this week compared to 2,036 metric tons the previous week. Currently, copper stocks in SHFE warehouses stand at 291,020 metric tons, compared to 102,511 metric tons during the same period last year.

    Outlook

    Copper remains with an upside bias due to expectations that reduced mining output will be unable to keep up with future copper demand, driven by a global push into green energy and electrification.

    Market risk persists as attention is focused on fulfilling deliveries to cover exposed short positions in the US Comex futures market, rather than on strong demand from leading consumer China. An influx of at least 100,000 metric tons of copper currently in route to the US CME exchange is expected to help satisfy bearish positions and alleviate some market pressure.

    This week, investors will closely monitor preliminary PMI estimates from various countries. Additionally, the FOMC Minutes are set to be released on May 22nd.

    Copper’s long positions increased by 5%, reaching 98,110 lots, while bearish positions rose by 2% to 34,863 lots during the reported week. The bull-bear ratio now stands at 2.80, indicating strong bullish dominance over the metal.

    The support levels for copper are at 920 and 905, while resistance is anticipated at 943 and 955.

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