(Bloomberg) — Copper futures in New York rose to an all-time high after a short scramble sparked a scramble to divert metal from other regions to the United States.
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The surge, which saw Comex futures soar more than 7% this week, has seen the metal for July delivery on the New York Exchange trade at a record premium for months, unprecedented levels compared to other global commodities like copper. It is traded at. exchange.
“Short spreads and futures holders are under pressure,” said Michael Cuoco, head of hedge fund sales for metals and bulk materials at StoneX Group.
The sharp price movements are concentrated in the Comex’s most active July contract. Widening premiums to copper prices on other global exchanges and the need for short sellers to take delivery of the metal against their positions are already causing Chinese traders to rush to arrange shipments to Comex warehouses in the United States.
“A short squeeze is likely to continue as traders may not be able to ship enough metal from bonded warehouses in China or from Europe to meet delivery dates,” said Jia Zhen, head of trading at Shanghai Dongwu Jiuying Investment Management. It will continue,” he said. phone. Metals may also be sourced in the Americas.
Comex futures for July delivery rose as much as 4.2% to $5.0855 per pound on Wednesday, surpassing the previous record for the most active contract set in March 2022. This high Comex price is equivalent to $11,212 per tonne, about $1,000 above the latest reference price. It just hit a two-year high on the London Metal Exchange.
The surge also pushed the Comex market into record backwardation, with July contracts trading nearly 30 cents a pound higher on Wednesday.
Short-squeeze rallies commonly occur in commodity markets, where traders in the red are motivated by inflated margin calls, the threat of having to take delivery of cash at contract expiration, or pay large rollover fees. This is because they are under pressure and are forced to relinquish their positions.
Dongwu Jiuying’s Jia said part of the rally in the July contract was due to pressure from traders who were shorting Comex and longing Shanghai Copper, so-called reverse arbitrage.
StoneX’s Cuoco said futures traders with long positions are likely to bring their positions forward to benefit from huge backwardation. “These are rich values. We expect our participants to profit from the table or roll forward their positions.”
–With assistance from Winnie Zhu and Jason Rogers.
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