Mon, 02 Oct 2023

Copper speculators anticipate global economic downturn

Robert Besser
16 Aug 2022, 01:33 GMT+10

LONDON, England: Despite a recent rebound, speculators in the international copper market, considered an indicator of the world's economic health, reported a global downturn, warning that the metal used in power and construction is expected to continue to fall.

Since benchmark LME copper hit a 20-month low on 15th July, selling at around $8,160 per ton, it is now up 18 percent, but also fell 25 percent since reaching a record $10,845 per ton in March.

Ole Hansen, head of commodity strategies at Saxo Bank in Copenhagen, noted, "Funds have been building up short positions in anticipation of recession," as quoted by Reuters.

Data from the COMEX showed that on 2nd August, money managers were 17,715 copper contracts or 200,888 tons short, down 2,042 contracts from one week earlier.

Some investors have been buying options, giving the holder the right to sell copper at a specific price at a fixed date in the future.

In a note, Morgan Stanley said the costs of smelting copper are at $5,085 per ton, rising to $6,000 to $6,400 per ton.

If the price remains below the marginal cost for a prolonged period, losses could force some producers to shut down.

Tom Price, head of commodities strategy at Liberum, said, "Sometimes the

spot price will just plunge right through that marginal level," as reported by Reuters.

Price estimates marginal costs for copper at around $6,100 per ton.

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