- Write by:
-
Friday, August 12, 2022 - 14:20:38
-
353 Visit
-
Print
Mining News Pro - Speculators in the copper market, viewed as an indicator of the health of the economy, are betting a global downturn means the metal used in power and construction has further to fall, despite its recent rebound.
The latest data shows more funds with bearish positions than bullish copper positions on the London Metal Exchange and COMEX.
Benchmark LME copper at around $8,160 a tonne is up 18% since hitting a 20-month low on July 15.
But it has fallen 25% since touching a record $10,845 a tonne in March because of a growth slowdown in top consumer China and aggressive interest rate hikes that threaten a global recession.
“Funds have been building up short positions in anticipation of recession,” said Ole Hansen, head of the commodity strategy at Saxo Bank in Copenhagen.
Data from broker Marex shows the net speculative short position in LME copper is lower, but still stands at 24% of open interest or 1.4 million tonnes as of Aug. 4.
Data from the COMEX showed money managers were net short 17,715 copper contracts or 200,888 tonnes on Aug. 2, down 2,042 contracts from a week earlier.
Some investors have been buying put options, giving the holder the right to sell copper at a specific price at 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.
Open interest in December LME put options lie at strike prices of $7,000, $6,000 and $5,000, LME data as of Wednesday showed.
Some of those levels correspond to marginal production costs that investors often use to gauge how far metals prices could fall in a bearish scenario.
The direct costs of smelting copper at the 10% of highest cost producers are $5,085 a tonne, rising to $6,000-$6,400 per tonne when sustaining capital expenditure – needed to maintain current output – is included, Morgan Stanley said in a note.
If the price remained below marginal cost for a prolonged period, losses could force some producers to shut down.
“Sometimes the spot price will just plunge right through that (marginal) level,” Tom Price, head of commodities strategy at Liberum, said, adding that the disconnect between costs and prices could last for weeks or months.
Price estimates marginal costs for copper at around $6,100 a tonne.
Short Link:
https://www.miningnews.ir/En/News/621960
A Native American group has asked all members of a US appeals court on Monday to overturn an earlier ruling that granted ...
Codelco is exploring more partnerships with the private sector as Chile’s state copper behemoth looks to recover from a ...
The London Metal Exchange (LME) on Saturday banned from its system Russian metal produced on or after April 13 to comply ...
The world’s coal-fired power capacity grew 2% last year, its highest annual increase since 2016, driven by new builds in ...
Peabody Energy Corp. shares sunk to the lowest in seven months after the biggest US coal miner warned that first-quarter ...
Peru’s Las Bambas copper mine, owned by China’s MMG, is facing renewed blockades of a key transport route after failed ...
Vitol Group confirmed that it’s starting to rebuild a trading book for metals after a long stint out of the market, with ...
Chinese investors are snapping up stocks tied to high-flying metals from copper to gold, aiding an onshore market facing ...
BMO Bank quietly dropped its policy restricting lending to the coal industry in late 2023, helping it avoid being ...
No comments have been posted yet ...