Copper at All-Time Highs - Will it go Higher?

Introduction:

Copper has surged 27% this year, while the S&P 500 has declined 4%. Traditionally, copper is a highly cyclical commodity, rising during periods of economic expansion and falling during recessions. However, this time it appears to be moving against the broader market—as equities and bonds signal lower growth, copper prices continue to climb.

This divergence can largely be attributed to Trump’s tariffs on copper imports, prompting businesses to stockpile copper ahead of the tariff implementation, thereby driving prices higher. In addition, the electrification trend, could also be boosting its base demand, making it less sensitive to economic cycles.

Trader Positioning:

The chart above illustrates the latest trader positioning in copper options and futures. Commercial hedgers—producers and merchants who use futures to mitigate price fluctuations in the physical commodity—have been steadily increasing their exposure this past year, and as copper reaches all-time highs they are decreasing their exposure from 1 standard deviation in Jan 2025 to 0.79 now.

In contrast, money managers and retail investors have been underweight copper during this year's rally, being underweight with 27% and 40% percentile positions, suggesting a divergence in market sentiment between hedgers and speculative traders.

The table above shows that YTD (last 3 months) commercial hedgers have been selling contracts, securing a high copper selling price, meanwhile, retail and money managers have been increasing their exposure as prices rise.

Conclusion:

From a fundamental perspective, we believe that Trump’s tariff fears are already priced in, and a correction is likely as markets begin to factor in a slowing growth outlook.

Additionally, commercial hedgers have started to increase their short exposure, although their positioning remains above historical averages, we anticipate a mean reversion in their positions, which could further increase selling pressure on copper prices.

Given these factors, we expect copper prices to revert toward their yearly moving average of approximately $4.40.

Full Report:

Full Commodity report is available for download below.