Bullish Copper Bets Drop as Once-Hot Market Cools

Beckett Bronze Company was incorporated May 21, 1913 as the Delaware Brass and Aluminum Company by a group of stockholders which included John Beckett, a molder, and his son, Charles

Speculative investors recently pushed bullish wagers on copper prices to their lowest level in more than a year, a sign that traders are worried that higher supply will cool down this year’s rally.

Net bets on higher copper prices by hedge funds and other speculators slid to 12,956 contracts during the week ended Aug. 24, the lowest level since June 2020 and down roughly 85% from the start of the year, Commodity Futures Trading Commission data show. The CFTC data measure futures and options, which are commonly used by professional investors to wager on price movements and by producers to hedge against volatility.

The slide in bullish bets coincides with a pullback in prices for the industrial metal that is widely used in manufacturing and construction. Copper prices are about 10% below a record hit earlier this year as supply constraints ease and traders worry that the Delta variant of the coronavirus will soften demand.

Most actively traded copper futures on the New York Mercantile Exchange rose 0.6% to $4.30 a pound on Thursday and are still up more than 20% for the year. They peaked north of $4.75 in May, boosted by bets on soaring demand as the economy rebounds from the depth of the pandemic.

A patch of weaker economic data from China, the world’s largest metals consumer, and bets that supply will rise moving forward have cooled the rally.

This week, the Chinese government made its latest release of copper stockpiles and other industrial metals into the market in a bid to contain this year’s advance in prices. A surge in raw materials costs this year has contributed to ballooning worries about inflation.

Another factor fueling bets on higher production moving forward: state-owned Chilean copper giant Codelco, which recently signed early deals with unions that could ease labor tensions. Worker strikes and coronavirus restrictions have disrupted output in Chile and other key producers in recent months.

The prospect of higher supply comes as many global economists cut their near-term growth forecasts due to the Delta variant, fueling bets on weaker demand.

Still, some analysts don’t expect prices to fall much further. Copper is well supported because of its uses to build everything from green-energy projects to houses, many analysts say.

Additionally, various supply-chain bottlenecks continue to make it difficult to move copper and other materials around the world in a timely manner, said Ed Meir, a consultant focused on metals at brokerage ED&F Man Capital Markets.

—Amrith Ramkumar contributed to this article.

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Appeared in the September 3, 2021, print edition as ‘Bullish Wagers on Copper Prices Fall to Lowest Level in Year.’

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