The Copper Market Is Extremely Tight, with Copper Futures Soaring

Published on: May 15, 2024
Author: Amy Liu

Goldman Sachs analyst Nicholas Snowdon previously warned that the entire copper market would enter an extremely tight state. Copper prices are rising, preparing for a potential breakthrough. On Tuesday, May 14th (local time), driven by short covering, New York copper futures soared by 5.5%, with the most liquid contract trading at a significant premium to other market benchmarks. Comex copper for July delivery surged to an intraday high of $5.026 per pound, just shy of the historical high of $5.0395 set in March 2022.

Michael Cuoco, head of sales for metals and bulk materials at StoneX Group hedge fund, stated: “The spread and short holders of futures are under pressure.”

This pertains to July Comex contract. The high of $5.026 per pound is equivalent to $11,080 per ton, more than $1,000 higher than the benchmark contract in the London Metal Exchange. This has also led to an unprecedented spot premium on the Comex market, with the July copper contract in New York trading 29.25 cents per pound higher than the September contract.

Traders note that unprecedented tightening is causing copper cargoes to shift toward the United States.

Cuoco anticipates that futures traders with long positions will opt for early delivery to capitalize on the substantial spot premium. These values are so high. We expect participants to close profit positions or continue to hold at such high levels.

There is a surge in global demand for copper, with BHP recently proposing a $37 billion acquisition of rival Anglo American, which has heightened market interest in copper. Furthermore, CEO Jonathan Price of mining company Teck Resources (TECK) stated that if copper prices reach $5 per pound, the company expects to generate $3 billion in annual EBITDA.

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