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LONDON: Two Chilean copper mines have been hit by strike action over the last week and a Canadian one has just been suspended due to wildfires.

The copper supply hits are mounting up, but you wouldn't know it from the price action.

London Metal Exchange (LME) three-month copper has so far spent the month of August gently bobbing around the $9,500-per-tonne level, last at $9,440.

The lack of excitement reflects a dearth of speculative interest in copper right now, with fund positioning low on the LME, the CME and the Shanghai markets.

Macro headwinds in the form of slowing growth impetus in China and the spread of the Delta variant of COVID-19 are currently outweighing copper's micro dynamics in investor minds.

Fund managers have collectively taken something of a holiday break on copper.

LME broker Marex Spectron estimates the net speculative long on the London market was 4.3% of open interest as of last Thursday - a one-year low. The collective bull bet reached 62% of open interest back in February, when copper was charging up through the $9,000-per-tonne level.

Funds remain net long of the CME copper contract but the commitment is weak by historical standards, amounting to 31,965 contracts.

That's slightly up on June's one-year low of 19,266 contracts, but a long way off the February peak of 87,671 when bull spirits were rampant.

It's noticeable that funds started rebuilding outright short positions on the CME contract after the dilution of the short squeeze on the September-December time-spread at the end of July.

Activity on the Shanghai Futures Exchange (ShFE) has been subdued since April, when open interest peaked at 394,614 contracts. It currently sits at 307,40, with trading volumes light over the last few weeks.

Investors everywhere seem decidedly unconvinced that copper is going to revisit June's record nominal high of $10,747.50 per tonne any time soon.

DEMAND HEADWINDS

When it comes to copper, the investment proxy for global growth, fund managers are still taking their cue from China, where a stimulus-fuelled recovery is fading.

Industrial output, fixed asset investment and retail figures out on Monday all came in below expectations, adding to nervousness about the potential spread of the Delta variant within the country.China's refined copper imports fell for the fourth straight month in July, adding to the sense of lost momentum, although the greater availability of scrap metal is an important hidden factor behind the headlines.

Meanwhile, the green infrastructure boost in the rest of the world is still pending.The US Infrastructure Bill's $1 trillion focus on upgrading transport systems and homes could boost the country's copper demand by 3%, or 80,000 tonnes per year, over a five-year period, according to research house CRU. ("The American infrastructure plan - what does it mean for metals demand?", Aug 12, 2021).

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