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Copper price: the squeeze has been squoze

After hitting an all-time intraday level of a smidgen under $5.20 a pound or $11,460 a tonne in Chicago a week ago, July copper has pulled back to exchange hands for $4.85 ($10,690) on Tuesday, paring some of last week’s steep losses. Copper trading enjoyed blow-out volumes on the way up with the paper equivalent of more than 10m tonnes, worth nearly $115 billion, traded in the most active contract in one 24 hour period on the CME mid-May. That’s more than twice the Dow’s average daily volume in dollars and three times German bunds.
The shorts squeeze, more of a feature of US trading than elsewhere, is now in danger of turning into a longs bear hug.
With cargoes from Chile and Peru being diverted to North America after the Chinese import arbitrage, another reliable source of volatility and tradeability, evaporated copper futures volumes are back to pre-craze days. Imagine it was fun while it lasted.A new report by Australian bank Macquarie titled Panama hold’em suggests the copper corrections will continue and forecasts average prices in the September quarter of $9,800.

Towards the end of the year the copper price should go back above $10,000, says the London-based commodities strategist Alice Fox and analysts from Macquarie’s London, Singapore, Shanghai and Delhi desks.Not exactly the torment the devil’s copper visited on shorts and longs in 2022 and 2023 then. However.
or prognosticators who believe copper entered a gravity defying phase in April/May and the next stop was $15,000 before going to $40,000 by the end of the decade because of – what else – AI, Fox and Friends have worse news.(Lest we be accused of double standards, MINING.COM is not afraid to talk our book, but at least the most ambitious copper price prediction quoted on this site was based on the log-normal shape of the grade-tonnage plot of porphyrys.
Not data centers and the other recent and equally underwhelming explanations for the new bronze age – more bullets. Or as WSJ had it a year ago – Democrats and the debt ceiling.) Even after an upward adjustment in the note, Macquarie sees the long term price at $9,000 ($4.08) in today’s money.
For the Robinhoods who thought trading copper futures is as much fun as movie theater or gaming stonks, Macquarie’s report at least gives them something to aim at (their emphasis):
“In essence, this [$9,000/t] is an equilibrium price and, given the fact that the copper market is very rarely in equilibrium, we would expect it to, potentially very significantly, overshoot during periods of tightness and undershoot during periods of weakness.”

Macquarie does say the uncertainty surrounding the future of Cobre Panama (hence the title of the note) could have a major impact on market balance and a restart, which the bank has sketched in for late next year, pulls forward predicted surpluses.

But with or without AI, military demand and Cobre Panama, over a longer horizon Macquarie’s outlook for copper is anything but supercycle-y:

“To be clear, we do not think a real-terms price higher than this will be needed for supply, including scrap, to play its role in rebalancing the market, nor needed to incentivise more demand destruction through thrifting and substitution. This is in the context of trend demand growth that we project to be very similar to that of the past 20 years, i.e. ~2.5%.

“The energy transition is taking over from China’s urbanisation and industrialisation as the major driver of global demand growth but, in our view, will not necessarily result in an overall acceleration.”
Oof.
Hat tip: JP