Copper must make its way into the LME to prevent legitimate fears of a stock-out, TDS’ Senior Commodity Strategist Daniel Ghali notes.
Market expectations and real-time demand diverge
“The market has been wrong-footed by Liberation day; expecting a sharp slowdown in demand, whereas our proprietary real-time estimates point to no evidence of a slowdown in commodity demand growth. Meanwhile, the threat of section 232 tariffs on Copper has been sucking Copper inventories from the rest-of-world, at the same time as Chinese stockpiling has further sapped inventories from the world.”
“Now, as LME inventories have reached critically low levels, timespreads have blown out, which should incentivize metal to flow back into the system. Curiously, expectations of Chinese Copper exports have emerged over the last weeks, but these have not yet made their way into LME warehouses. Shanghai traders have been on the offer in SHFE Copper.”
“If metal does not imminently make its way back into the system, legitimate fears of a stock-out a-la 2021 will reemerge. Large-scale CTA buying activity over the last sessions have supported flat prices as we expected, but algos are vulnerable to a notable whipsaw in a big downtape. In the imminent-term, we expect notable CTA buying activity in zinc & lead.”
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