https://www.miningweekly.com
Business|Construction|Copper|Energy|Mining|Projects|Turbines|Turbines|Bearing
Business|Construction|Copper|Energy|Mining|Projects|Turbines|Turbines|Bearing
business|construction|copper|energy|mining|projects|turbines-company|turbines-person|bearing

Hedge funds bet against copper for first time in three years

29th May 2023

By: Bloomberg

  

Font size: - +

Hedge funds are betting against copper on the London Metal Exchange for the first time since the early months of the pandemic — a sharp reversal from just weeks earlier after China’s disappointing recovery sent prices tumbling.

LME data this week showed investment fund positioning in copper flipped to a net short — the first since June 2020, after bearish bets surged since mid-April and long positions have been unwound. The metal, viewed as an economic bellwether for its use across sectors from construction to electronics, has been under mounting pressure after official data pointed to weak demand from the world’s top consumer.

It’s a dramatic turnaround in sentiment from early in the year, when money managers piled into bullish copper bets, predicting that renewed demand from China coupled with rising consumption for green tech would over-stretch the world’s already-constrained supplies. Exchange warehouse inventories had reached perilously low levels in recent months, and several key mines faced operational setbacks and political disputes.

Instead, Chinese demand has been a let down, while supplies are showing signs of loosening — stockpiles on the LME increased every day for five straight weeks. The effect has been stark: fund short interest on the exchange is near the highest on record in data going back to 2018, while long bets have been slashed to the lowest in seven months.

“The single largest variable that has disappointed people has been the pace of recovery of China’s metals demand,” said Dwight Anderson, founder of Ospraie Management, which manages over $1-billion.

Much of the shift is likely due to trend-following trading programs repositioning as prices have moved lower, according to TD Securities, whose trend-follower tracker now suggests that substantially more selling may occur if prices dropped below $7 700. LME copper futures have regained a little ground in recent days, trading at $8,116 a ton on Friday after hitting a six-month low earlier in the week.

Long bets on copper had been been an increasingly popular choice for investors looking to profit from the energy transition. Wind turbines, electric vehicles and grids all use large amounts of copper and many analysts eventually see that consumption growth driving prices higher.

For now, though, the focus is on copper’s correlation to broader economic growth, which is facing headwinds from turmoil in the banking sector and tighter monetary policy.

Hedge funds trading copper on the CME Group Inc’s Comex flipped to net short three weeks ago, according to data from the Commodity Futures Trading Commission.

“Risk appetite is down everywhere,” said Bart Melek, global head of commodity strategy at TD Securities. Funds are seriously considering the prospect of recession and contemplating what the reduction in demand will mean to supply and demand balances, he said.

At the same time, recent mine-supply disruptions seen in Panama, Chile and Peru have taken “a back seat,” said Michael Cuoco, head of hedge-fund sales for metals and bulk materials at StoneX Group. Some big new mining projects have also come online recently, and analysts from Bank of America Corp. and Citigroup Inc. are expecting a small copper surplus this year.

There’s still plenty of risks for speculators on either side of the copper trade. The protracted standoff over the US debt-ceiling has been weighing on risk assets in recent weeks, while traders are still split on whether the Federal Reserve’s tightening cycle is at an end.

The Fed’s higher interest rates have also diminished the appeal of holding non-interest bearing assets like copper for long periods of time. That could be putting off those who see the energy transition fueling gains in the years ahead.

“I’m bullish but the implementation is impossible,” said Jo Harmendjian, a portfolio manager at Tiberius Group AG. “Everybody is talking, but nobody has skin in the game.”

More stories like this are available on [bloomberg.com](https://www.bloomberg.com)

©2023 Bloomberg L.P.

keywords: ALLTOP, ALTNRG, BASIC, BUSINESS, CMD, COS, FIN, FRX, INDUSTRIES, MARKETS, METMNG, NRG, TOP, WORLD, WWTOP, WWTOPAM, WWTOPEU


Canonical Link:https://www.bloomberg.com/news/articles/2023-05-26/hedge-funds-bet-against-copper-for-first-time-in-three-years

©2022 Bloomberg L.P. All Rights Reserved

Edited by Bloomberg

Comments

Showroom

Booyco Electronics
Booyco Electronics

Booyco Electronics, South African pioneer of Proximity Detection Systems, offers safety solutions for underground and surface mining, quarrying,...

VISIT SHOWROOM 
SMS group
SMS group

At SMS group, we have made it our mission to create a carbon-neutral and sustainable metals industry.

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.127 0.164s - 115pq - 2rq
Subscribe Now