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In a recent webinar organized by Il Sole 24 Ore, Giacomo Tulino, a consultant at Commodity Evolution, offered a detailed and in-depth analysis of copper prices, focusing on crucial aspects such as rising inventories, declining premiums, and the role of speculation.
Rising Copper Stocks: A Surprising Dynamic
One of the highlights of Tulino’s talk was the significant increase in global copper stocks. He highlighted how copper stocks in major warehouses, such as those on the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE), have grown consistently in recent months.
This phenomenon is in sharp contrast to trends in previous years and reflects a significant change in the dynamics of supply and demand.
“The growth in copper stocks is an important signal that should not be ignored,” Tulino said. “This increase indicates that copper supply is currently outstripping demand, a situation that could affect prices for the metal in the coming months.”
Reduction in Premiums: A Signal of Demand Weakness
Another crucial aspect discussed by Tulino was the reduction in premiums on copper. Premiums, i.e., the premium over the spot price for immediate delivery of the metal, have fallen sharply, suggesting lower demand than previously expected.
“The decline in copper premiums is indicative of demand failing to keep pace with available supply,” Tulino explained. “This trend could reflect a weakness in demand from key sectors that use copper, such as construction and the electronics industry.”
Speculation: A Factor of Volatility in the Copper Market
Tulino also discussed the role of speculation in the copper market, noting how it can contribute to price volatility. Speculation, often fueled by expectations of quick short-term profits, can cause significant price movements that do not always reflect market fundamentals.
“Speculation is a key element that can drastically affect copper prices,” Tulino said.
Future Prospects for the Copper Market
Concluding his remarks, Tulino stresses the importance of closely monitoring the increase in stocks and the reduction in premiums. Prices may extend the current downturn toward the first major targets at $9,000/mt.