Funds and China buyers squeeze copper's tariff trade
XLB•Selling by Western funds and buying interest from Chinese industrial users are narrowing the U.S. copper premium over London, as Shanghai stocks hit a three-year low of 33,848 tons and the Yangshan import premium reached a record $230 per ton.
1. Funds cut copper positions
Fund managers have reduced their net long position in CME copper from 82,649 contracts in mid-September to 34,444, while outright long positions fell from 96,824 to 58,475. The latest figures do not capture the worst of the selling at the end of last week.
2. Chinese supply tightens
Shanghai Futures Exchange copper stocks fell to 33,848 tons, a three-year low, while the Yangshan premium rose to a record $230 per ton on Monday. London cash copper also traded at a $195-per-ton premium over three-month metal.
3. Arbitrage gap narrows
The CME spot premium over London is back at $80 per ton after briefly turning to a discount last week, far below its August level of more than $700. U.S. copper imports totaled 1.3 million tons year to date through August. Since early October, CME stocks rose by 27,000 tons, while LME warehouses in the United States received 107,000 tons; another 62,000 tons sat in off-warrant storage. Whether that metal clears U.S. customs or leaves the country depends on how much Chinese buyers will pay.
