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aws试用账号(www.2km.me)_Insight - Funds call it quits on copper stocks poker game

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Uncertain period: A worker supervises the liquid copper mold production line at a smelting plant in Glogow, Poland. There’s a lot of uncertainty clouding the big picture for copper next year. — Bloomberg

FUND managers appear to have closed their copper trading books early this year.

Speculative positioning on both the London Metal Exchange (LME) and CME copper contracts has fallen sharply since October’s frenzied trading, which saw LME three-month metal spike up to US$10,452.50 (RM44,229.75) per tonne amid unprecedented time-spread turbulence.

The market has since calmed.

The premium for cash copper, which flared out to US$1,103.50 (RM4,669.46) per tonne before the LME stepped in to limit the backwardation, closed Friday valued at flat.

The three-month price has spent the first half of December trading languidly either side of the US$9,500 (RM40,199.25) level, last at US$9,498 (RM40,190.79) per tonne.

LME inventory has risen from the extreme lows seen in October, but there has been no sign yet of the mass deliveries threatened by China’s producers.

Was it a bluff? Or is the metal on a slow boat from Shanghai?

This game of copper stocks poker may not be over yet, but the added uncertainty has persuaded funds to fold their cards and call it quits on copper for the rest of the year.

Cutting length

Money managers are still collectively net long of the CME copper market but bull positioning at 13,945 contracts is close the year’s low of 12,956 registered in August.

Outright long positioning has been slashed from 82,538 contracts in October to 50,045, the lowest level since the second quarter of last year, when the world was still recovering from the first Covid-19 hit.

Short positioning remains historically muted at 36,100 contracts, funds evidently still reluctant to bet against copper even at these elevated price levels.

It’s worth noting that open interest on the CME copper contract, which has a higher speculative profile than the LME product, has imploded since October and is now also back at levels last seen in the first half of 2020.

LME open interest has held up better but funds have been leaving the London market as well, the collective net long position contracting from 39,577 lots at the height of the October turbulence to 28,154 as of the latest Commitments of Traders Report.

LME broker Marex, which uses its own methodology to track fund positioning, thinks the fund liquidation has been even more extensive, assessing speculative positioning on the London copper market as flat to net small short.

The overall picture is the same, however.

Copper and base metals trading “has become highly illiquid, with the heavy risk reduction reflected in the very light positioning”, Marex noted in Monday’s daily report.

Squeeze over, but what happened?

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