Copper Prices Reach Record High of $11,104.50 Per Metric Ton

Quick Look:

• Record Copper Prices: LME copper prices surged to $11,104.50 per metric ton due to a short squeeze on the COMEX contract;
• Short Squeeze Impact: Traders rushing to cover short positions have driven a 27% price increase since January;
• China’s Copper Reserves: China maintains high copper inventories, peaking at 491,000 tons in March, stabilising global supply.

The London Metal Exchange (LME) recently witnessed an unprecedented surge in copper prices, reaching a record nominal high of $11,104.50 per metric ton. This significant milestone reflects the dynamic and often unpredictable nature of the global metals market. The surge is partly attributed to the LME playing catch-up with its U.S. counterpart, the CME Group, where a short squeeze on the COMEX contract has driven traders to scramble for copper. This price rally has highlighted a complex narrative of constrained supply and burgeoning demand, particularly driven by green energy initiatives.

The COMEX Short Squeeze and Its Implications

The ongoing short squeeze on the COMEX contract has had far-reaching implications for traders and the global copper market. Traders are now hastily shipping metal to CME warehouses in the United States to cover their short positions, a move that has intensified the already heated rally in copper prices. This panic-induced buying frenzy has driven the copper price up by 27% since January, reinforcing a bullish market sentiment.

Despite the rush to secure copper, it’s essential to note that the global supply isn’t entirely depleted. China’s substantial metal reserves serve as a reminder that while there are regional shortages, the global market still holds significant volumes of the metal. However, this offers limited direct relief to those caught short on the CME contract, as the logistics and time required to transport copper across continents complicate the immediate availability.

China’s Robust Copper Inventory

China, the world’s largest copper buyer, has maintained robust inventories, providing a buffer against the volatile global market. The seasonal stock surge around the Lunar New Year holidays was particularly strong this year, with headline ShFE inventory peaking at 300,045 tons in mid-April and remaining at elevated levels. Additionally, the International Energy Exchange’s branch of the ShFE reported another 45,000 tons of bonded copper, pushing global exchange inventory to 491,000 tons at the end of March, the highest since August 2021.

Several factors have contributed to this build-up in Chinese exchange stocks. Weak spot demand, robust imports, and rising domestic output have kept China’s copper inventories high. Chinese buyers have been de-stocking in response to the sharp price rally, which has delayed the usual post-holiday inventory drawdown. Moreover, China’s imports of refined metal have remained strong, accelerating from 1.65 million tons in the first half of 2023 to 2.07 million in the second half.

The Future of Copper Supply and Demand Dynamics

The intricate dance of supply and demand in the copper market continues to evolve, with various factors at play. In the first four months of this year, China’s cumulative imports of refined copper stood at 1.25 million tonnes, up by 17% compared to the same period in 2023. Net imports also saw a significant increase, reflecting lower exports and higher inbound volumes of metal concentrate, which rose by 7% year-on-year to 9.34 million tons.

The increase in copper concentrates has directly influenced domestic production. China’s refined metal output rose by 8% in the first quarter. Furthermore, it accelerated to 9% in April. This increased production capacity highlights China’s strategic adjustments. These adjustments aim to ensure a steady supply of metal. This is particularly important in the face of disruptions like the closure of the Cobre Panama mine at the end of 2023.

The record high copper prices on the LME underscore a market grappling with supply constraints and robust demand. However, the global copper landscape remains complex and multi-faceted. China’s significant copper reserves and production capacity counterbalance the immediate pressures seen in Western markets. Therefore, while regional shortages may cause short-term volatility, the overall global supply remains more stable than it might initially appear. The interplay between supply, demand, and strategic reserves will be critical as the market continues to navigate these challenges. This dynamic will shape the future trajectory of metal prices.