June 13, 2022

LME Copper 3M Select is down $160/mt, with last trade at $9,275/mt (7:00 AM CST), due in part to Shanghai reinstating COVID lockdowns late last week. Over the weekend, authorities conducted COVID screenings in 15 out of 16 of Shanghai’s districts, and six of these districts were on lockdown during the tests. These new lockdowns come less than a week after Shanghai and Beijing reopened in early June.  Copper prices jumped early last week; however, the optimism quickly faded after Beijing restarted some lockdowns on Thursday. LME copper finished nearly unchanged last week, but pessimism reins today.

As Reuters columnist Andy Home stated late last week, “Shanghai copper inventory and curve structure suggest a domestic market that is not yet prepared for a significant rebound in demand without a shift change in imports.” Excessive inventories and poor Chinese demand could keep a cap on copper prices. Copper producers might consider applying simple hedges involving put options to protect from a further decline in prices. One other possible strategy is a costless collar, meaning a producer would buy a put and simultaneously sell a call option, thereby creating “zero cost.” Such positions are standard for producer hedging, but they can result in opportunity costs or cash costs if metal prices increase. Please contact AEGIS for specific strategies that fit your operations. (6/13/2022)

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Price Indications

Today's Charts

AEGIS Insights

06/8/2022: AEGIS Factor Matrices: Most important variables affecting metals prices

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05/11/2022: China's Metals Exports are on the Rise

6/9/2022: Copper price slips after new China lockdowns

6/9/2022: China COVID jitters flare up as parts of Shanghai resume lockdown

6/7/2022: Steel output starts June with a lull

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