An epic air force battle suddenly unfolds.

In the middle of the night of May 14, Beijing time, during the US trading session, the New York futures market experienced an epic shortfall. The price of New York copper futures surged 5.5% during the intraday session that night, approaching an all-time high. Wall Street traders said that New Zealand copper is shorting like never before. Traders who short on copper futures or directly shorted the July NZ futures contract faced significant losses and were forced to make up their positions.

During today's Asian trading session, the price of New York copper futures continued to strengthen sharply. As of press release, the price of New York copper futures was 5.0845 US dollars/pound, a record high. The Shanghai Copper Index remained volatile at a high level today. By the close, it was reported at 8,2070.58 yuan, with a cumulative increase of 19% during the year.

The main trigger for the sudden epic shorting of New York copper futures was the tightening of copper supply and demand. Huibo News estimates that the global supply and demand gap for refined copper from 2024 to 2026 will be 70,000 tons, 103,000 tons, and 196,000 tons, respectively. Citibank believes that spot copper prices will continue to rise in the next few months.

Against the backdrop of tight copper supply and demand, an epic deal continues to attract market attention. On May 13, local time, global mining giants$BHP Group Ltd (BHP.US)$Allegedly, the company made another takeover offer for Anglo-American Resources Group, and the price was raised to 34 billion pounds (approximately RMB 310 billion), but it was rejected. According to an investigation by analysts and traders, BHP Billiton will have to raise the price to at least £37.2 billion (approximately RMB 340 billion) before it can win over British and American resources.

Epic emptying

In the middle of the night of May 14, Beijing time, during the US trading session, the price of New York copper futures surged 5.5%. At one point, the price of copper delivered by Comex in July rose sharply to 5.026 US dollars/pound, which is only one step away from the all-time high of 5.0395 US dollars set in March 2022.

During today's Asian trading session, the price of New York copper futures continued to strengthen sharply. As of press release, the price of New York copper futures was 5.0845 US dollars/pound, a record high. The Shanghai Copper Index remained volatile at a high level today. By the close, it was reported at 82070.58, with a cumulative increase of 19% during the year.

This round of shortening last night happened with the copper contract delivered in July of this year. The contract's trading price was a huge premium over other market benchmark contracts. The price of $5.026 per pound was equivalent to 11080 US dollars per ton, which was more than 1,000 US dollars higher than the London Metal Exchange (LME) benchmark copper contract.

Traders said that today's New Zealand copper is shorting like never before. Some industry insiders pointed out that traders who shorted the price spread on copper futures or directly shorted the July New Zealand copper futures contract faced significant losses and were forced to make up their positions.

According to the news, on Tuesday local time, the Chilean government unexpectedly raised its copper price forecast. The average copper price is expected to be 4.20 US dollars/pound in 2024, compared to 3.84 US dollars/pound previously.

In fact, since this year, copper prices have been strong and have continued to rise. In late April this year, LME copper prices surpassed 10,000 US dollars/ton for the first time since 2022. Up to now, the cumulative increase in LME copper prices during the year has exceeded 20%.

Why empty

From a fundamental point of view, the main trigger for the sudden epic contraction of New York copper futures was the tightening of copper supply and demand.

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.

Copper is known as the “mother of the cycle,” and copper prices are very much related to the global manufacturing cycle. As the global manufacturing industry begins to replenish inventories, demand for core commodities such as automobiles, electronics, home appliances, and real estate chains will often drive up copper prices.

At the same time as demand is rising, the supply of copper is tight. 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.

As the gap between supply and demand in the industry continues to widen, the market generally expects copper prices to continue to rise.

The global copper supply and demand gap is gradually widening. Huibo News estimates that the global supply and demand gap for refined copper from 2024 to 2026 will be 70,000 tons, 103,000 tons, and 196,000 tons, respectively.

Citibank believes that spot copper prices will continue to rise in the next few months, reaching 10,000 US dollars per ton by the end of the year and climbing to 12,000 US dollars in 2026.

In its report, Goldman Sachs 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.

An epic deal

Against the backdrop of tight copper supply and demand, an epic deal continues to attract market attention.

On May 13, local time, global mining giant BHP Billiton said that the company made another takeover offer for Anglo-American Resources Group and raised the price to 34 billion pounds (approximately RMB 310 billion), but it was rejected.

Looking back, BHP Billiton proposed to buy British and American resources at a price of 31.1 billion pounds in late April, but was rejected by British and American Resources on the grounds that this offer seriously underestimated the company's prospects.

In less than a month, BHP Billiton made a new offer. The £34 billion offer was 15% higher than before. The new deal still requires Anglo-American Resources to split the two subsidiaries before the acquisition.

BHP Billiton CEO Mike Henry said on the 13th: “BHP Billiton submitted a revised proposal to the board of directors of Anglo-American Resources Group. We are convinced that the proposal will be a win-win for shareholders of BHP Billiton and Anglo-American Resources. We are disappointed that the second proposal was rejected.”

According to a survey by analysts and traders, BHP Billiton would have to raise the price to at least £30 per share to successfully acquire British and American resources. Based on this price, BHP Billiton's price would need to reach about £37.2 billion (approximately RMB 340 billion), which is about 20% higher than the initial price.

The main purpose of BHP Billiton's bid for British and American resources was to obtain the latter's copper assets in South America. Currently, the global mining industry generally underinvests in new copper ore, and miners are more willing to increase their market share through acquisitions.

As the world's largest mining company, if BHP Billiton successfully conquers British and American resources, it will become the world's largest copper producer, with a global market share of about 10%. At the same time, the company also has a huge portfolio of iron ore and coal assets.

edit/emily