Copper Market Turns Bearish as Demand Falters

Funds have begun adopting increasingly bearish stances on copper as the market reels from the sudden loss of 600,000 tons of expected copper supply. Most experts and the copper market itself expected to produce a surplus of copper in 2024, but the unexpected loss of more than one-half a million tons of copper supply threw the market into a sudden deficit.

In late 2023, the Panama government instructed a Canadian mining and metals company to shut down its lucrative Cobre Panama copper mine after the country’s Supreme Court invalidated its operating license. The mine was responsible for 1% of the world’s copper supply and produced 350,000 tons of copper annually. In addition, London-based miner Anglo American cut its 2024 production target for copper from up to a million tons to 730,000–790,000 tons, depriving the supply chain of around 200,000 tons of copper.

With demand for copper expected to skyrocket thanks to its applications in construction and clean energy, supply lines could be facing significant demand pressure within the year. Even so, money managers seem to be focusing on a picture of weak global demand and have shifted from net long positions on the Chicago Mercantile Exchange’s (CME) copper contract in early 2023 to record net short positions.

Although recent copper supply-mine issues caused mining analysts to lower their surplus expectations, a gloomy micro environment is overshadowing copper’s micro dynamics. The year 2022 saw many managers switch between net long and net short positions on the CME copper contract due to the metal’s choppy range-bound price action. By November, most funds held net long positions after LME copper prices hit $7,870 per ton; by the end of the year, there were close to 15,000 net long positions on the CME copper contract.

However, money managers began reassessing their copper positions when the global supply chain suddenly lost its expected surplus. The result was 25,309 net short positions by the end of last week compared to 44,634 outright long position contracts.

Funds betting on lower copper prices seem to be out of sync with recent supply developments, especially now that copper demand from the clean-energy sector is poised to explode this year. Funds may be basing their decisions on falling treatment charges for turning mined concentrates into refined copper at smelters.

Chinese economic recovery, particularly in the troubled real-estate sector, growth in the renewables sector and a resurgence in global manufacturing could finally convince managers to buy copper.

Exploration companies such as First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) are likely to be key in bringing to market new supplies of copper to address the looming shortage in the years and decades to come.

NOTE TO INVESTORS: The latest news and updates relating to First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) are available in the company’s newsroom at https://ibn.fm/FSTTF

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