China Fund News Morning
As the short-squeeze war in the copper market intensifies, all institutions have their own joys and worries.
Recently, comex copper prices have risen sharply. According to market news, ixm, a trading company owned by China Molybdenum, held a large number of short positions and "suffered heavy losses from the squeeze."
In response, late at night on May 16, CMOC issued a clarification announcement stating that its wholly-owned subsidiary ixm is a world-class metals trading platform and does not engage in purely speculative transactions. The transactions ixm engages in are hedging and arbitrage trading strategies such as cross-market, cross-temporal, and cross-variety, and the risks are completely controllable.
In addition, the comex copper futures benchmark contract fell back on Thursday, hovering near its historical peak, while forward contracts rose. According to foreign media reports, because short positions on the benchmark contract were deeply trapped, positions had to be moved to forward contracts. Traders said that short sellers have decided to postpone closing positions until after June, hoping that copper prices will fall or that producers will be able to sell production in the future for delivery.
comes to see the details -
's trading company was "short squeezed"?
The billionaire giant stated late at night
comex copper futures have been rising rapidly recently, and short sellers are retreating. Recently, foreign media reported that Swiss commodity trader ixm, a subsidiary of China Molybdenum, purchased physical copper to counter a large number of short positions.
Subsequently, news such as "ixm suffered heavy losses due to short-selling" and "China Molybdenum was 'targeted by Wall Street'" came out one after another, and China Molybdenum's stock price fell for two consecutive days. Many investors asked China Molybdenum on the Shanghai Stock Exchange e-interactive platform, asking for clarification on whether the situation was true and whether the company had enough spot for delivery.
Currently, copper products are at a high premium in the US comex market. As a global commodity trading company, it is beneficial to conduct physical transactions in this market. Aikeson's hedging trading strategy is different from pure speculation, and the risks are completely controllable. Aikeson has a strict risk control mechanism and operates within the framework.
ixm uses derivatives contracts from major global metal exchanges to strictly manage commodity price risks based on its global physical trade needs. It is not directly related to the realized value of the company's self-produced copper and will not affect the sales price of the company's self-produced copper. . ixm does not engage in purely speculative trading. The transactions ixm engages in are hedging and arbitrage trading strategies such as cross-market, inter-temporal, and cross-variety, and the risks are completely controllable.
Luoyang Molybdenum said that as of now, the company's production and operations are normal and the overall liquidity is at the best level in history. The company is positive and optimistic about future copper prices and has not carried out strategic hedging business for self-produced copper products since the beginning of 2024. Record copper prices in 2024 and the company's record copper production will also provide strong support for performance.
Although clarification statements were issued twice, China Molybdenum's stock price has not improved. At the opening of trading on May 17, China Molybdenum's stock price rebounded briefly and then plunged. As of press time, the stock price was 8.52 yuan per share, with a total market value of 184 billion yuan.
It is worth mentioning that, in addition to China Molybdenum, companies such as Western Mining have also been questioned by investors whether there are cross-market arbitrage and other behaviors.
Comex copper futures are hovering at high levels
Short sellers have decided to postpone closing positions until after June
Let’s review the situation of the “short beating” in the Comex copper futures market -
Recently, there has been a squeeze on the July contract in Comex copper futures. On May 15, the comex copper futures 2407 contract hit $5.128/pound, about $11,300/ton, breaking the high since March 2022.The contract also hit a record premium over the Comex September contract, a condition known as backwardation in commodities markets and a sign of a short squeeze.
Under the short-squeeze market, foreign media reported, citing people familiar with the matter, that commodity trading giant Trafigura and China Molybdenum's ixm are trying to purchase physical copper to deliver their large short positions on the US CME exchange.
Trafigura and ixm hold large short positions in the Comex copper market, which means they are betting that copper prices will fall, or hedging their own price risk exposure. Unexpectedly, comex copper prices suddenly skyrocketed starting from Tuesday, causing these short positions to be severely "short squeezed."
Meanwhile, the premium of New York copper futures to London Metal Exchange (LME) prices has soared to an unprecedented level of more than $1,200 per ton, which has also shocked global markets. According to foreign media, Colin Hamilton, managing director of commodity research at BMO Capital Markets, said, "The price difference between the New York Mercantile Exchange and the London Mercantile Exchange exceeds US$1,000 per ton is unprecedented." The expiration of the contract caused short positions to be squeezed. , and intensified this trend.
In addition to China Molybdenum, Trafigura, another party involved in the "short squeeze" news, admitted that it will ship more physical copper to the United States. Trafigura is one of the largest physical copper suppliers in North America and will ship more copper to Comex given the premium in that market. It is reported that Trafigura has asked some copper producers to reroute shipments in May and June to the United States, but it is very difficult to temporarily change the destination.
In terms of market conditions, the comex copper futures benchmark contract fell back on May 16, but still hovered near the historical peak; forward contracts rose as traders moved recent contract positions to forward months.
Market news said that because short positions on the benchmark contract were deeply trapped, positions had to be moved to forward contracts, while buyers continued to expect further rises in copper prices. Traders said that short sellers have decided to postpone closing positions until after June, hoping that copper prices will fall or that producers will be able to sell production in the future for delivery. As copper prices continue to rise, short sellers are facing increasing delivery pressure, and opening positions has become an effective means for them to deal with this pressure.
In order to maintain market stability, CME has increased the margin requirements for copper futures trading. The adjustment will take effect after the market closes on Thursday. CME Clearing said in a notice that the exchange raised the direct margin requirement for copper futures by $500 to $5,000 per lot.
Soochow Futures Research Report believes that from a macro perspective, U.S. CPI fell as expected in April, retail sales data unexpectedly weakened, and market expectations for interest rate cuts increased, causing the U.S. dollar to fall and pushing up copper prices. Fundamentally, the tight supply of copper concentrate on the supply side has not been effectively alleviated, and the scale of production cuts in May is expected to be further expanded. However, downstream demand is still resilient, and the fundamentals are still supportive under passive replenishment. Copper prices are easy to rise but difficult to fall.
Changjiang Nonferrous believes that copper prices are rising strongly, driven by multiple factors. Specifically: From the domestic market, downstream consumers are gradually becoming more accepting of high copper prices, and the overall trend is to purchase on demand. At the same time, air-conditioning sales remain strong, and the production and sales data of new energy vehicles also continue to grow, providing a positive market environment for rising copper prices.
Globally, continued attention and investment in the green energy industry has further enhanced market confidence in rising copper prices. As an important raw material for the green energy industry, demand for copper is expected to increase as the industry develops, providing long-term growth momentum for copper prices. Taken together, there is ample momentum for rising copper prices, and it is expected that they will continue to rise in the short term.
Editor: Xiaomo
Copyright Statement
"China Fund News" owns the copyright to the original content published on this platform. Reprinting without authorization is prohibited, otherwise legal liability will be pursued.
