Financial Services Association, May 16 (Editor: Xiaoxiang) This week, the New York copper market experienced an epic shortfall. COMEX copper prices soared by about 6% in just a few days. Meanwhile, in this round of insane shortfall, the trading company IXM (IXM), a trading company under the Luoyang Molybdenum Industry, was also reported by the media to be in a “vortex” due to holding a large number of short positions.

On Thursday, Luoyang Molybdenum Industry plummeted by about 5% in the A-share market.

In response, Luoyang Molybdenum issued a statement on Thursday saying that it has paid attention to media reports about its trading company Exxon, and made the following clarifications:

The hedging strategy of an international trading company buying in one market and selling the same amount in another market is common practice in the industry.

Currently, there are high premiums for copper products in the US COMEX market. As a global commodity trading company, it is beneficial to carry out physical transactions in this market.

Exxon's hedging trading strategy is different from simple speculation; the risk is completely manageable. Exxon has strict risk control mechanisms, and all operations are within the framework.

According to public information, Exxon is part of the Luoyang Molybdenum Industry Group and is the third largest non-ferrous metals trader in the world. It was founded in 2005 and is headquartered in Geneva, Switzerland. Its main business scope is the integrated trade of non-ferrous metals and their minerals. It is dedicated to the discovery, integration, mixing, processing, transportation and distribution of metals. Currently, the types traded include copper, aluminum, lead, zinc, silver, nickel, cobalt, lithium, iron niobium, etc.

Earlier, according to media quoting five sources on Wednesday, commodity traders Trafigura (Trafigura) and Exxon are seeking to buy physical copper to deal with their large short positions on the CME (CME). After copper prices soared to record highs, they might need to buy physical copper to deliver these positions to avoid further losses due to rising prices.

Short positions can be a bet on falling prices, or they can be used by producers or traders to hedge their products. Shorting occurs when parties with short positions are forced to buy back at a loss or deliver physical copper to close positions.

COMEX copper prices hit a record high of more than 5.1 US dollars per pound on Wednesday. The cumulative increase has been 28% so far this year. In particular, over the past week, the price increase has increased markedly.

Torc is one of North America's largest physical suppliers of copper. In response to relevant media reports, Torque also stated a few days ago, “We are shipping more metals to COMEX due to the premium in the New York copper market.”

The Chicago Mercantile Exchange said, “We are continuously monitoring our market, and market participants are managing the risks and associated uncertainties of copper futures according to the design.”

When will the New York copper shortfall end?

Many industry insiders said that it is expected that the COMEX copper shortfall will not end soon, and prices will continue to rise until more metals from South America and Australia arrive in the US.

CRU analyst Robert Edwards said, “Although the fundamentals of copper supply and demand in the US do not support copper prices, they may not be able to justify this extreme vacancy situation, which indicates that some other unknown things are happening in this market.”

Obviously, the current rise in COMEX copper has clearly surpassed that of LME copper, which has created arbitrage opportunities between the two, that is, copper producers and traders sell products at different locations to take advantage of the price difference.

A source said that considering costs such as freight and insurance rates, traders can earn around $300 per ton by extracting copper from the LME system and delivering it to CME.

However, the problem is that half of the copper in LME registered warehouses comes from Russia, and copper from these production areas cannot be delivered to the CME system.

Citibank analysts also believe in a report that bearish-related bearishbacks have prolonged COMEX's gains, but this upward trend may be difficult to maintain. The redirection of physical copper will ease the imbalance in arbitrage, but it will take time.

According to sources, Tokk has asked some copper producers to transfer May and June goods to the US. However, it is extremely difficult to change destinations in a short period of time.

Judging from the current overall pattern of the copper market, supply and demand in the entire copper market is actually entering a very tight state. On the one hand, the supply side is frequently disrupted, and current copper production will drop sharply in the next few years, raising concerns about a shortage of copper supply; on the other hand, global manufacturing recovery, AI waves, and energy transformation are also boosting market demand for copper.