Copper: Limited supply and CTA-driven buying bias – TD Securities

Sharp Decline in Copper Inventories Fuels Market Interest

Daniel Ghali, Senior Commodity Strategist at TD Securities, notes a significant drop in freely available copper stocks so far this year. Current supplies now cover just 9.1 days of demand, compared to 11.4 days at the year's outset. Even with visible warehouse inventories increasing and cautious market sentiment, Ghali asserts that the shortage of copper is reaching levels not seen before. He anticipates that Commodity Trading Advisors (CTAs) are likely to slightly increase their long positions in copper across most price movements in the upcoming week.

CTA Activity Driven by Record Copper Shortages

According to Ghali, copper stands to benefit the most if there is a rapid resolution to the ongoing conflict, despite some traders worrying about excess copper accumulating in storage facilities.

Updated internal analyses from TD Securities reveal that the amount of unencumbered copper available has dropped considerably this year, leaving only enough to meet just over nine days of consumption, down from more than eleven days at the beginning of the year.

This contrast between the rise in visible warehouse stocks and the simultaneous decrease in unencumbered inventories suggests that copper is being shifted from less transparent sources into official storage, effectively taking more metal out of circulation.

Ghali describes the current copper scarcity as unparalleled in recent history.

While traders remain cautious due to ongoing risk-off attitudes, CTAs still have a comfortable buffer before any major selling is triggered, and are currently leaning toward increasing their exposure to risk assets like copper.

As a result, CTAs are expected to gradually add to their long positions in copper over the next week, regardless of most price changes.