US Copper Prices Skyrocket to All-Time High

 US copper prices rocketed to a record premium over the global benchmark in London. The trigger was because speculative funds piled up and traders were forced to close short positions in the world's most important industrial metal.

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Quoting the Financial Times, copper futures traded in New York surged to an all-time high, with the most active three-month contract through July up 11% in the past week or up more than US$ 5 per pound. This price is equivalent to more than US$ 11,000 per ton.

The increase pushed the gap between US copper prices and the global benchmark in London to a record gap of more than US$ 1,000. Usually the difference is not much, around less than US$ 90 per ton.

Concerns about limited supplies for delivery in New York also prompted more speculation. Speculative trading activities for those trying to make money from copper price trends are considered easier on the Chicago Mercantile Exchange than on the London Metal Exchange, as the contracts are more complex.

Bearish commodity traders, including Trafigura and others, rushed to secure copper for shipment to the US and covered short positions. However, Trafigura refused to comment on the selling position.

Director of Copper Research at Wood Mackenzie Eleni Joannides said that a number of speculative long positions are currently quite large and have been entered over the last few months.

The sudden sharp rise in the red metal follows similar price movements in recent years in nickel, gas and cocoa, especially volatility in commodities trading as supplies were disrupted and traders incurred more buying and selling costs.

It also comes as mining company BHP seeks to take over Anglo American in a £34 billion deal that would increase its portfolio of mines that produce superconductive metals that are critical to reducing carbon in the global economy.

As is known, copper has various uses, for example for buildings, electrical cables and electric cars. However, a shortage of ore from mines is expected to result in a shortage of refined metal as refineries reduce production due to falling profitability.

Analysts said that the rise in US copper prices also reflected a sizable flow of funds to US-headquartered companies in the commodities sector.

This shows the disconnect in the market and the impact of fund purchases this year. "The market has become overexcited about the long-term growth in copper demand and the risks to supply," said base metals analyst at StoneX Natalie Scott-Gray.

Commodities have gained popularity among asset managers and hedge funds as a hedge against inflation, as expectations of a US Federal Reserve interest rate cut this year have eased.

Driving further buying was a news report on Wednesday that Beijing was considering a proposal for local governments to buy unsold homes, which could stimulate demand for copper.

According to analysts, the rally also indicates that copper supplies are tighter in the US due to logistical challenges stemming from limited capacity in the Panama Canal and the impact of a bridge collapse in Baltimore in March.

On the other hand, there is the problem of excess copper in China, where demand has been weaker than many expected this year because it is not eligible for delivery to the CME and the material available on the market is Russian, which has been banned by the US.

Meanwhile at Marex, Edward Meir said that this price movement was related to futures contracts and this situation was very overbought.

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