Copper risk returns – TDS

LME Copper convenience yields are now reflecting critically low inventories, TDS' Senior Commodity Strategist Daniel Ghali notes.

Copper's tension builds

"Metal has flowed out of the system over the last months, reflecting increased competition for physical Copper from both China and the United States."

"We highlighted that metal must make its way back into the system to prevent fears of a stock-out from reemerging, and while tom-next is now trading close to the LME's capped rate, interestingly, the largest traders in Shanghai have increasingly sold their Copper positions concurrently with a decline in Chinese premiums."

"Shanghai Copper traders also remained on the offer in the overnight session, with selling activity now totalling 84.5kt of notional Copper month-to-date. In this context, it is notable that deliveries into the system have remained scarce. Nonetheless, for the time being, CTA buying activity could further exacerbate pressure on LME flat prices and curve."