Following the historic short squeeze last month, the phenomenon of spot premium in the New York copper futures market has once again rapidly intensified in the past two trading days, bringing new pressure on holders of short interest positions.

As shown in the figure below, the price of the Comex copper futures contract for delivery in July is currently 7.4 cents per pound higher than the September contract, indicating a shortage of supply.

Earlier, during the short squeeze storm in the New York copper futures market last month, the scale of spot premium had risen to an unprecedented 29.25 cents per pound. At the time, commodity traders Tokko Group and Ekosen, a trading company owned by CMOC Group Limited, were reported by the media to have been caught in the 'vortex' as they held large short interest positions.

Although the latest scale of spot premium is still far from that time, it has undoubtedly sounded an alarm for commodity traders and investors holding short interest positions in the July contract.

It should be emphasized that although the overall supply of the global copper market is sufficient, similar situations currently only exist in the New York market, since similar futures contracts of near months in Shanghai and London are trading at a significant discount to the forward contracts.

According to inventory data, copper stocks at Comex warehouses are currently at their lowest level in 15 years. Although there have been shortages last month, the situation of tight inventory has not significantly improved.

For many short sellers, if they cannot find physical copper in a timely manner, they may need to close out their short positions and risk pushing the July contract to a higher premium in the process. Currently, there are less than six weeks left until the contract expires, and the recent surge in spot premiums shows that many short interest holders have not been able to cover their positions in time.

For investors who do not have the ability to deliver physical metal, the current situation has more or less meant that they will incur losses when covering their short interest positions. To get rid of these contracts, they have to be at the mercy of long interest holders.

This year, fund managers who bet on higher copper prices have significantly increased their long positions, which has to some extent led to the appearance of a short squeeze in the industrial metal market and helped the Comex copper futures contract (per pound) hit a new historic high of $5.199 last month. Shortly thereafter, the copper prices in London and Shanghai also hit new highs.

However, in recent weeks, copper prices have fallen back as some investors have taken profits and concerns about near-term demand have increased.

Guotai Junan Futures stated in its latest report released on Thursday that short-term downstream and terminal inventory building supports copper prices, and the medium-to-long term copper price is still in a long position. The judgment of copper price trends tends to focus on whether macroscopic and microscopic factors resonate. From a macroscopic perspective, the long-term interest rate cut by the Federal Reserve will provide liquidity to the market, and the U.S. economy is healthy with expectations of repair in the forward period. From a microscopic perspective, although global copper supply is currently in excess over the long term, the surplus is relatively small and global copper inventory is still at a low level.