Column: No new year resolution for out-of-favour copper market: Andy

LONDON, Jan 17 (Reuters) – New year but same old problems for Doctor Copper.

The copper market remains decidedly out of favour among the investment community with fund positioning extremely light by historical standards.

London Metal Exchange (LME) three-month metal briefly broke back up above the $10,000-per tonne level last week but collapsed again on Friday.

Last trading around $9,650, the copper price seems too high to attract fresh buying but global inventory is too low for bears to dare short it.

The resulting lack of resolution has seen trading volumes on all three major venues fall in recent months as speculators chase more enticing narratives in other metals such as nickel, aluminium and zinc.

MONEY MANAGER POSITIONING SUBDUED

Money managers remain net long of the CME copper contract but bull enthusiasm is low at 22,203 contracts, according to the latest Commitments of Traders Report showing the state of play at the close of Jan. 11.

This time last year, when copper was trending strongly higher, the collective bull positioning stood at 76,449 contracts. The record high was set in 2017 at 125,376 contracts.

Recent shifts in money manager positioning have been almost exclusively derived from the long side with fund short positions little changed over the last two months.

The lack of investor participation is mirrored in the London market, where the money manager net long of 29,912 contracts is a long way off last February’s record high of almost 48,000 contracts.

It’s worth noting that LME broker Marex Spectron, which uses its own methodology to track speculative flows, estimates funds are running net short of copper to the tune of around 24,000 lots. Funds are also short of aluminium – but to a lesser extent than copper – and net long all the other core LME metals, according to Marex.

TRADING VOLUMES SLUMP

Copper’s fall from grace among fund players is also clear to see in sliding volumes across all three major trading venues – LME, CME and the Shanghai Futures Exchange (ShFE).

Activity on the LME’s copper contract shrank by 7.0% last year, making it the second poorest performer among the London market’s core base metals suite.

Only tin fared worse, registering a 15% year-on-year slump in volumes, reflecting the soldering metal’s combination of record high pricing and record low inventories.

The CME copper contract saw a second year of anaemic growth, futures volumes up just 1.1% last year on 2020 levels.

Activity on the ShFE contract grew by a more robust 12% last year but the headline figure flatters to deceive, reflecting high volumes in the first half of the year as activity recovered from the previous year’s COVID-induced slump.

The big picture was of falling copper volumes across the board in the second half of 2021. In December, average daily volumes were down 16%…