In This Article:
(Repeats Tuesday's column with no changes to the text)
By Andy Home
LONDON, Jan 23 (Reuters) - Funds are adopting an increasingly bearish stance in the copper market, preferring to focus on a globally weak demand picture rather than signs of supply-chain stress.
Money manager positioning on the CME's copper contract has swung from net long at the start of the year to the largest net short since the middle of 2022.
The positioning pivot has played out against early-year price weakness. London Metal Exchange (LME) three-month copper hit a five-month high of $8,716 per metric ton in late December but has been on the back foot ever since, last trading around $8,400.
A string of mine supply hits has caused analysts to revise down their expectations of surplus this year, but copper's micro dynamics are being overshadowed by a gloomy macro picture.
NEW YEAR, NEW SHORTS
Money managers flipped between net long and net short on the CME copper contract several times last year as they tried to navigate choppy range-bound price action.
The bias turned to the long side in November after the LME three-month price held key technical support around the $7,870-per ton level and started moving higher.
Funds were net long of CME copper to the tune of almost 15,000 contracts at the close of December.
However, the new year has brought about a collective re-assessment, net positioning shifting decisively to the short side in the first half of January.
The net short amounted to 25,309 contracts as of the close of business a week ago, the largest bear bet since July 2022.
Outright long positions have been pared to 44,634 contracts, the lowest since June last year, while fresh selling has lifted outright short positions to 69,943 contracts from 45,127 at the end of December.
SUPPLY RETHINK
The collective bet on lower prices looks out of synch with recent supply-side developments.
Treatment charges levied by smelters for converting mined concentrates into refined copper have been falling fast as availability tightens.
Spot terms are currently assessed by pricing agency Fastmarkets in the low $30s per ton, compared with benchmark 2024 terms of $80 per ton negotiated in November.
Too many smelters are chasing too little concentrate.
The closure of First Quantum's Cobre Panama mine in December has opened up a hole in the raw materials supply chain.
Moreover, lower production guidance by both Anglo American and Vale has seen analysts take the red ink to their medium-term supply forecasts.
Macquarie Bank, for example, has lifted its call for a price low of $7,600 per ton in the third quarter of this year to $8,000, citing "a larger concentrate deficit and a smaller metal surplus than previously forecast for 2024". ("Supply revisions shift copper market balance", Jan. 16, 2024)