Copper Prices Surge

LONDON, Oct 30 – Copper is in the spotlight once again, with prices soaring to a nominal high of $11,200 a tonne on the London Metal Exchange this Wednesday.

Both broader economic factors and specific market dynamics have turned in favor of rising prices, particularly as fund managers have started to embrace long positions, adding more financial momentum.

Investment funds’ long positions in LME copper contracts have surged to levels reminiscent of March, just prior to the wave of tariffs introduced by then-President Trump.

The looming threat of a trade war between the U.S. and China, which consumes a huge amount of copper, was certainly a drag on prices. However, the recent temporary truce negotiated by Trump and China’s Xi Jinping has lessened some of that pressure.

While the forecast for copper demand is looking up, supply issues persist. The International Copper Research Group has noted that recent mining crises may lead to a shortfall in refined copper by 2026.

This volatility and stock market fluctuations explain why copper has regained investors’ attention, at least for now.

Funds Flow Back

Since March, fund managers have been cautiously optimistic about copper, even as the market faced both general and specific disruptions due to the specter of U.S. tariffs on refined copper.

Investor involvement in CME’s U.S. copper contracts, which are closely tied to these tariffs, hit a decade low in August as traders shifted their focus toward precious metals.

While LME copper volumes thrived from global supply chain issues, a notable decline in fund activity was masked by increased industrial demand.

However, things shifted in August when LME prices began to recover despite ongoing production downgrades at major mines.

The funds ramped up their long positions from 55,325 contracts in August to 87,152 contracts, simultaneously reducing short positions.

Many speculate that returning fund money is likely to flow back to the CME contract, although the suspension of the weekly Commitment of Traders Report due to the government shutdown complicates that picture.

The last report at the end of September indicated that funds were cautiously re-entering long positions following a drop in U.S. copper premiums after July, when tariff decisions were delayed until the following year.

Since then, open interest in the CME contract has climbed to a four-month high alongside the price rise, indicating more investors are getting back involved.

Market Disruption

Short positions held by investors in LME copper have nearly halved since April.

This recent price rally has undoubtedly forced some funds to reevaluate their strategy on short positions.

Interestingly, the low stock levels on the LME also discourage maintaining short positions. Earlier this month, the cash premium for three-month metal spiked to $224 a tonne.

Though that spread has returned to a contango at $25 per tonne, it’s a stark drop from over $90 in August.

This disruption stems from the U.S. not making significant progress in unraveling tariffs and trade issues.

Even with potential U.S. import tariffs on refined metals postponed until mid-next year, CME spot prices are trading at a notable $300 per tonne premium to LME prices, even higher in future contracts.

Richard Holtum, CEO of Trafigura, mentioned during LME Week that the doors for import arbitrage remain open as the U.S. continues to attract copper supplies.

While the pace of shipments to U.S. ports may have slowed, it’s affecting LME stock levels, which peaked at 159,000 tonnes after increased deliveries from China in July, but have since dipped to 135,350 tonnes, with just 30,477 tonnes in out-of-warranty storage.

Exports from China were robust in July, hitting 118,400 tonnes—the second highest this century—but those numbers fell in September to just 26,400 tonnes, predominantly sent to countries like Thailand and Vietnam where LME warehouses are not present.

Looking Forward

The resilience of CME’s premium compared to LME prices underscores the ongoing effects of tariffs on copper pricing.

This might present challenges for funds attempting to re-enter the market, particularly since the current alignment of macro and micro factors is fragile and could easily shift, especially in today’s unpredictable trade climate.

Markets, including copper, grapple with whether the recent peace talks between Trump and Xi represent a genuine resolution or merely a temporary pause.

Copper prices dipped below $11,000 a tonne on Thursday morning as traders processed the latest developments in tariff negotiations.

The microeconomic picture for copper might seem promising, but its overall outlook remains highly uncertain, and this year’s tariff-related volatility may not be finished yet.