New York copper futures surged 5.5% in the intraday period, and the price of copper for Comex's July delivery jumped to an intraday high of $5.026 per pound, just one step away from the all-time high of $5.0395 set in the early days of the Russian-Ukrainian conflict in March 2022. Traders said that today's New Zealand copper is emptying like never before, causing copper cargo ships to be transported to the US. Traders with long positions on copper in July are expected to make a profit or roll it over to further contracts in the future to take advantage of huge futures discounts.
At 23:50 p.m. Beijing time on Tuesday, during the US trading session, New York copper futures surged 5.5% intraday, and the copper price for Comex's July delivery jumped to an intraday high of $5.026 per pound, which is only one step away from the historical high of $5.0395 set in the early days of the Russian-Ukrainian conflict in March 2022.
The above shortfall occurred with the Comex contract in July. Due to shortfall, the trading price of NZC's most liquid contract has a large premium over other market benchmark contracts. The price of $5.026 per pound is equivalent to $11080 per ton, which is more than $1,000 more per ton than the London Metal Exchange (LME) benchmark copper contract.
On Tuesday, LME copper closed down $72 to $10,114 per ton. Lun Copper mainly fell 1.2% in the intraday period. Shanghai Copper closed down 0.94%.
The sharp rise in New Zealand copper in July also contributed to an unprecedented futures discount in the Comex market: the July contract was 29.25 cents higher per pound than the September contract.
Traders said that today's New Zealand copper is emptying like never before, causing copper cargo ships to be transported to the US.
Regarding the shorting of the July NHK contract, industry insiders pointed out that traders who shorted the price spread on copper futures or directly shorted the July NHK futures contract faced significant losses and were forced to fill up their positions. Traders with long positions on copper in July are expected to make a profit or roll it over to further contracts in the future to take advantage of huge futures discounts.
What needs to be clarified is that the shorting of the July contract for NZC did not last long. Since then, the contract's increase has narrowed markedly. As of press release, it has risen 2.5% during the day, and is on the $4.886 line.
On the same day of Tuesday, the Chilean government raised its copper price forecast. The price of copper is expected to be 4.2 US dollars/lb in 2024, compared to the previous forecast of 3.84 US dollars.
The main reason why New Zealand copper is shorting out is that the supply and demand for copper is tightening. On the one hand, supply-side frequency disruptions have raised concerns about copper supply shortages; on the other hand, global manufacturing recovery and energy transition have boosted demand for copper. As one of the most important basic metals, copper is widely used in electric vehicles, power grids, and other renewable energy fields. In addition, construction and development costs for major mines are also increasing. Existing copper production will drop sharply in the next few years. The agency predicts that miners will need to invest more than 150 billion US dollars between 2025 and 2032 to expand copper capital expenditure to meet the industry's supply needs.
Copper prices have continued to rise since this year. In late April, the price of LME copper surpassed 10,000 US dollars/ton for the first time since 2022. As the gap between supply and demand in the industry continues to widen, the market generally expects copper prices to continue to rise.
Goldman Sachs previously raised the expected price of copper at the end of this year from 10,000 US dollars/ton to 12,000 US dollars/ton, and the average price forecast for the whole year was raised from 9,200 US dollars/ton to 9,800 US dollars/ton, maintaining the 2025 average forecast of 15,000 US dollars/ton. Goldman Sachs predicts that to stimulate long-term mining investment, the long-term average price will need to be maintained between 12,000 and 13,000 US dollars/ton; to solve the short-term copper scarcity problem, the average copper price is expected to reach at least 15,000 US dollars/ton next year.
In fact, in the US, soaring copper prices have already been felt by ordinary people: in San Francisco, people have cut off the charging cables for Tesla electric cars and sold the copper wires inside as non-ferrous metals.
Other netizens have noticed a high correlation between copper prices and Russell 2000, the benchmark stock index for US small-cap stocks:
Why should copper prices pay close attention? Copper is also known as “Doctor Copper” due to its importance in industrial production and its sensitivity to the macroeconomy. Copper is widely used in the fields of electricity, light industry, machinery manufacturing, construction industry, defense industry, etc., and its demand is seen as a direct reflection of countries' economic activities. Once the real economy fluctuates, copper prices are easily affected — because it can predict economic trends more accurately than academics with doctorates, and its price reflects the current economic trend more intuitively than many economic data.
Editor/Somer