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Rokos Capital Management and Andurand Capital Management have been prominent among hedge funds piling into the copper market, with bold bets on dramatically higher prices that have already delivered early wins.
The influx of new money into copper has bemused some industry insiders, who point to weak demand in China and a well-supplied metal market. However, a series of mine setbacks in recent months has helped spur increasingly bullish investment bank forecasts suggesting that a long-predicted global shortage may arrive earlier than expected.
“We believe that we are at the beginning of the copper bull-market and that the recent move higher in prices is just the start,” Andurand wrote. “Copper faces a decade-long supply deficit driven by the confluence of increasing demand due to the energy transition and persistent underinvestment in mine expansion.”
“Our thesis now is that copper supply is about to fall short of demand, forcing prices substantially higher,” the firm said in a letter to investors. “We think the best way to invest in that thesis is the most direct way — in this case through options on copper futures.” Trafigura — the world’s top copper trader and for years one of the market’s most vocal bulls — said on Thursday that the rally wasn’t justified based on fundamental supply-and-demand conditions. However, the company predicted the market would tighten as a result of supply constraints.
While some of those factors have been lending support to prices for years, the recent surge in AI stocks has left traders and analysts trying to work out how much copper the burgeoning industry might need to transmit the vast amounts of power it looks set to consume.
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