Copper prices have risen relentlessly from $4,371 per ton in March last year to over $10,450/ton now.
Stories of a new supercycle put out by the likes of Goldman Sachs may have helped. However, so have massive imports by China over the last year.
Reuters reports physical purchases by China, both commercial and state, hit 4.4 million tons last year, up from 1.2 million in 2019. Such volumes have fed the narrative that supplies are going to become constrained. In turn, that has encouraged investor — particularly Chinese investor — buying.
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Copper prices and long positions
But the price and those investors look like they may be reappraising direction.
Net long positions, Reuters reports, have slumped on the SHFE to the lowest level since October 2020. Meanwhile, LME net long positions have retrenched to a more normal 43% from a peak at 62% in February.
News that top producer Chile has seen output slip for the 10th consecutive month in March has been taken by bulls as supportive news. However, the International Copper Study Group said earlier this month that the global market would be in surplus to the tune of 79,000 tons this year. It forecast a surplus of 109,000 tons for 2022.
China’s refined metal imports
Refined metal imports into China have been trending lower this year. The Shanghai Metal Market premium is at $38.50 a ton, the lowest it has been since 2017.
The electrification story is still widely bought into across the whole metals spectrum. Copper, tin, cobalt, nickel, lithium have benefited from that demand.
However, copper and copper prices have arguably benefited more than most over the last 12 months.
At the same time, all good things come to an end.
Speculators, at least, seem to be putting their dollars where their expectations are. Funds have moved out of copper and into iron ore and steel futures of late, at least for the time being. That signals what may be a pause, or maybe the peak, for prices.
Watch those position reports. The price has been driven at least in part by investor sentiment. Position reports tell us a lot about that sentiment.
What they are telling us today is sentiment is not behind further rises.
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