EconomyCopper Market Speculators Bet on a Global Recession, and...

Copper Market Speculators Bet on a Global Recession, and Here's Why

Speculators in the copper market, seen as an indicator of the health of the economy, are betting that the global slowdown means the metal used in energy and construction will have to continue falling despite its recent rebound.

The latest data shows that there are more bearish than bullish funds on the London Metal Exchange (LME) and COMEX.

Benchmark LME copper, at about $8,160 a tonne, has risen 18% since hitting a 20-month low on July 15.

However, it has declined 25% since hitting a record high of $10,845 a tonne in March, due to slowing growth in top consumer China and a series of aggressive interest rate hikes that threaten a global recession. .

“Funds have been building up short positions in anticipation of a recession,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Data from brokerage Marex shows the net speculative short position in LME copper is smaller but still 24% of open interest or 1.4m tonnes as of August 4.

COMEX data shows money managers were net short 17,715 copper contracts or 200,888 tonnes on August 2, down 2,042 contracts from a week earlier.

Some investors have been buying put options, which give the holder the right to sell copper at a specified price on a fixed date in the future.

An options trader, who asked not to be named, said many speculators had been using LME options to target the downside.

Some of those levels correspond to the marginal costs of production that investors typically use to gauge how far metal prices could fall in a downside scenario.

Cash costs for copper smelting at the top 10% of cost producers are $5,085 per tonne, rising to $6,000-6,400 when sustaining capital expenditures—necessary to maintain current production—are included. Morgan Stanley said in a note.

If the price remains below marginal cost for an extended period, the losses could force some producers to close.

The price of crude oil grows 16% weekly and records its best performance since...

At the weekly cut, the WTI grew 15.88%, while the benchmark for Great Britain increased 11.43%, its best performance since mid-March 2022.

Aluminum and nickel soar as LME considers banning Russian metals

The London Metal Exchange, one of the most important in the world, is considering prohibiting Russian metals from being delivered against Stock Exchange contracts.

The markets live a black Friday in the face of greater risk aversion

The Dow Jones recorded its fourth negative day with a decrease of 1.62%, reaching a level of 29,590.41 points, its lowest level since November 2020.

soups! Aluminum price falls to 18-month low

A Fed rate hike could slow economic growth, hurting demand for aluminum.

Aluminum price falls to its lowest level in 16 months

Weak demand in China, the top metals consumer, has affected the price of aluminum and other base metals, reducing risk appetite.

More