LONDON: Funds have dumped their bets on higher copper prices as the turbulence triggered by the collapse of Silicon Valley Bank continues to roil financial markets.
Early-year enthusiasm for copper as a proxy for China’s re-opening from stringent lockdown has succumbed to the contagious fear spreading from the banking sector to other risk asset classes. The investment community has turned net short of CME copper for the first time in five months, while funds have cut their long exposure on the London Metal Exchange (LME).
Investors’ negativity towards Doctor Copper contrasts with the bullish headlines generated by the FT Commodities Global Summit. Copper, currently trading in London around $8,900 per tonne, could surpass its previous March 2022 price peak of $10,845 and hit $12,000 this year, according to Kostas Bintas, co-head of metals at trade house Trafigura.
Goldman Sachs is also expecting higher prices, arguing that the pace of global inventory draws could reduce visible stocks to an all-time low of 125,000 tonnes by the end of the second quarter. Fund managers, however, are having none of it. Right now macro fear is overwhelming the micro picture.
The CFTC Commitments of Traders reports are now fully up to date after the delays caused by the February cyber incident at ION Cleared Derivatives. They show fund managers turning net short of the CME copper contract in early March for the first time since October last year.
The collective bear call flexed out to 9,837 contracts in the middle of the month before being trimmed back to 6,967 contracts as of March 21. Driving that shift in positioning has been a sharp reduction in outright long positions, which have slumped from a January high of 78,429 contracts to a current 37,173.
Short positions have built by only a relatively modest 6,823 contracts to 40,140 over the same time-frame.
The early-year bullish exuberance has clearly evaporated. The LME’s positioning reports paint the same picture. Investment funds bought into copper in January, the net long position expanding from 11,830 to 32,397 contracts at the end of the month.
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