According to LME inventory data, LME copper inventories saw a significant increase in July. As of the end of the month, LME copper inventories reached 239,400 tons, marking a 32.96% increase from the beginning of the month, and hitting a new low in recent years. Expectations of a Fed rate cut have emerged once again, possibly enhancing the volatility of the USD in August. Short-term disruptions in copper mining may lead to a low-level rebound in copper prices, but overall demand is limited, and it is projected that copper prices in August will mainly fluctuate within a certain range.
Since mid-May, fund managers have closed out long positions of more than $20 billion in copper, intensifying concerns about Chinese demand and causing investors to rapidly exit this crucial industrial commodity.
Following an unprecedented buying frenzy by investors, copper prices soared to a record level of over $11,100 per ton in May, but have since fallen by more than one-fifth, with funds also making significant withdrawals.
Investor enthusiasm for long-term prospects in data centers, renewable energy, and electric vehicles has been challenged by historic softness in Chinese demand, leading to a reversal in copper prices.
Currently, with copper prices hovering around $9,000, a key concern for both bulls and bears is whether the exodus frenzy has already subsided. Bullish positions on the New York Mercantile Exchange and the London Metal Exchange have returned to levels seen in March, but they remain historically high.
Daniel Major, a metals and mining analyst at UBS Group, stated, “In May, the market was evidently completely overbought, possibly as a result of the momentum-driven AI derivative trading. Have we seen the majority of the associated bubbles dissipate from the market? Yes, I believe we may have. From a fundamental perspective, the imminent supply squeeze might instill the remaining investors with confidence to stick to their bets. While demand is soft and the overall market is in surplus, an increasing number of people anticipate that smelters will soon be compelled to reduce production following a collapse in processing fees. This is certainly enough to maintain investors’ positions fairly stable, unless there is a significant deterioration in the macroeconomy from now. I don’t anticipate widespread liquidation of bullish positions unless the macroeconomic conditions start to worsen.”
On Tuesday, copper prices on the London Metal Exchange fell by 1% to $8,932.50 per ton, marking the lowest closing price since March.