Stability Amid Uncertainty in the Copper Market

The deferral of the threat of US import tariffs on refined copper has brought a semblance of normality to the market. Physical copper, which rushed into the US previously, continues to flow into CME warehouses. The CME spot premium over the London Metal Exchange (LME) has stabilized around the $100 per ton level, similar to its pre – tariff – scare state.

However, fund managers remain cautious. After the market’s wild ride in the first part of the year, they are still reluctant to engage fully with copper. Investor positioning on the CME copper contract shrank to a decade – low in August and has only slightly increased since. Although investors remain net long, this is mainly due to a significant decline in short positions. Bulls are tentatively re – entering the market.

The removal of the tariff threat has left the market without clear price direction. Physical arbitrage flows have muddied the fundamental picture. Evidently, fund managers believe there are more profitable opportunities in other commodity sectors, especially precious metals.

Bear Exodus from CME Copper Futures

Fund positioning, both long and short, on the CME copper futures contract reached a low of 51,685 contracts on August 18, the lowest since 2013. This mass investor departure led to a 42% slump in average daily volumes to 53,776 contracts, the lowest since December 2021. Trading in the main copper options contract at CME fell even more, by 56% year – on – year.

Notably, short – position holders a...