Copper Futures Slowly but Surely Forming Sustainable Upward Trend

Although these are oil and gold prices that are constantly being monitored for possible early detection of stable trends, copper’s place in this respect is very special. It is copper that is often seen as a reflection of the world’s economic health, and it has been out of favor with investors since October when the London Metal Exchange (LME) stepped in to restrain a market in danger of disorderly meltdown.

The copper price surged again last week on Thursday as LME inventory posted a rather violent bounce-back pointing to a likely replay of events leading up to last year’s super squeeze. Indeed, copper stocks are once again approaching historically low levels, with only 200,402 tonnes (tons) of available inventory officially held by the LME, Comex and SHFE, with New York’s Comex being responsible for more than half the total.

Back in January Reuters reported that Shanghai copper “scaled a more than two-month peak” on tight supply. Thereafter, Shanghai copper climbed 4% to 71,970 yuan a ton, after hitting its maximum of 73,040 yuan last week, the highest reading since October 21. Copper for delivery in March rose on the Comex market in New York, touching $4.6120 per pound ($11,913 per ton), also the highest since October.

Even the commodity bears seeing serial interest rate hikes in 2022 are wary of the potential for another upside spike amid continued supply chain disruption and low inventory.

This wariness is justified because LME stocks seem to face real replenishment trouble in a slow-motion re-run of events leading up to last year’s super squeeze. Copper could be heading towards supercycle territory in the medium term, with price levels expected to reach above $5 per pound in the medium term - especially, if we keep getting the kind of jaw-dropping inflation data like the one posted on Thursday, February 10.