Copper short squeeze continues as CMOC and speculation Trafigura...

Copper short squeeze continues as CMOC and speculation Trafigura is also caught out

• LME copper is trading at near $10,500/t following a major move higher, led by speculative positioning on COMEX.
• The US exchange, which is more speculative by nature than LME which is preferred by end users, saw spreads blow out to over $1000/t premiums.
• There have been numerous reports of major trading houses suffering margin calls from short positions.
• China’s CMOC, which owns the IXM trading group, filed a report to the Shanghai Stock Exchange yesterday stating its positions were ‘completely controllable’ and its trades were ‘100% hedged to reduce price risks.’
• Reuters reported on Wednesday that IXM and Trafigura were sourcing physical copper to deliver into CME to cover short positions.
• The positions reflect expectations that current copper prices have moved ahead of current demand requirements, with China buying muted.
• Supply disruptions have limited concentrate availability, seeing smelters rush to secure available feedstock to keep their operations running, with some operating at a loss.
• Traders expect redirected shipments into the US to take some pressure of current prices, although this could take up to two weeks.
• Trading volumes in base metals have seen huge spikes this week, with LME contracts hitting all time highs in liquidity terms.
• Speculators are wagering on base metals alongside hopes of lower interest rate environments and improved PMI data.
• Russian sanctions have also fuelled concerns over metal shortages.
• Copper hedge fund positioning is reaching highest levels since January 2018.
• Shanghai speculators are also taking part, with futures trading volumes setting record highs in April.
• ETFs are seeing major inflows as retail investors flock to gain exposure to the recent rally.