Are copper prices moving too fast?
Copper prices have retreated from the recent highs as the market is lacking signs of tightening despite lasting supply disruptions at the world’s two largest mines, Carsten Menke, Commodities Research Analyst, Julius Baer
Despite lasting disruptions at the world’s two largest mines, copper has retreated from its recent highs above $6,000 per tonne. Prices were down another per cent yesterday after the London Metal Exchange reported the biggest one-day increase of its inventories in more than fifteen years. While exchanges only account for a small share of the total inventory, they provide a readily available and reliable snapshot of the market. Hence, yesterday’s big increase raises the question whether the current fears of undersupply and the related bullishness in the futures market are overdone. We think so, as we struggle to find indicators pointing towards undersupply and a tightening market balance.
The future’s curve remains upward sloping while physical premiums have moved sideways or even moderated, signalling no rush by copper consumers to secure metal. While the risks related to today’s disruptions should not be underestimated, we believe they should be offset by sizeable stocks of non-refined metal in China and increasing recycling. Overall, we remain of the opinion that copper prices have moved too fast too far, primarily driven by improving sentiment rather than improving fundamentals. For further details on our view on copper, please refer to our upcoming study “Copper: Overhyped” which will be published later today.
Copper prices have retreated from the recent highs as the market is lacking signs of tightening despite lasting supply disruptions at the world’s two largest mines. Julius Bear remains of the opinion that prices have moved too fast too far and maintain a bearish view.