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A massive dislocation between the prices for copper traded in New York and other commodity exchanges has rocked the global market for the metal and prompted a frantic dash for supplies to ship to the US.that has driven up prices on the Comex exchange in recent days. The premium fetched by New York copper futures above the London Metal Exchange price has rocketed to an unprecedented level of over $1,200 per ton, compared with a typical differential of just a few dollars.
“The broader story is that there are new investment funds that are boosting their exposure to copper for a multitude of reasons, and while that’s a global trend, a huge amount of that investment has been heading to Comex,” said Matthew Heap, a portfolio manager at Orion Resource Partners, the largest metals-focused fund manager.
Hedge funds and other traders had taken the other side of the bullish trades on Comex, betting on narrowing differentials between the contracts in New York, London and Shanghai, or between New York contracts for different delivery dates, often using substantial leverage. With prices on the Shanghai Futures Exchange relatively depressed, some Chinese physical market participants had also sold on the LME and Comex, with plans to export.
“We continuously monitor our markets, which are operating as designed as market participants manage copper risk and uncertainty,” the CME said in a statement. Traders and miners in South America have also raced to boost their US shipments. Chilean copper-mining giant Codelco is directing all of its available volumes to the market and also negotiating with customers to postpone some sales so that it can maximize deliveries, people close to the situation said. Codelco didn’t immediately respond to a request for comment.
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