Copper Rebounds From Two-Week Low With Eye on China Briefing

Copper prices have shown resilience, bouncing back from a two-week low as investors eagerly await a crucial policy briefing from China's Finance Minister, Lan Fo'an. The metal, which is a key indicator of global economic health, has been volatile in recent weeks, driven by a mix of factors including shifts in investment funds' positions, China's demand dynamics, and global surplus.

The recent rebound in copper prices can be attributed to a combination of factors. Firstly, the shift in investment funds' positions has played a significant role in influencing copper price momentum. After a sharp increase in long positions during Q2, which drove copper prices to an all-time high, funds have since reduced their bullish conviction. However, the recent decline in short positions suggests that funds expect copper prices to remain relatively stable within their current range. This shift in sentiment has contributed to the metal's recent price fluctuations.

Secondly, China's demand slump and exports of refined copper have significantly impacted the price decline. As the world's largest consumer of copper, China's demand dynamics have a substantial influence on global copper prices. The recent surge in cathode exports from China, combined with weak industrial data, has undercut bullishness around the metal's demand prospects. However, the arbitrage window to import refined copper to China has reopened, causing premiums for the metal there to rise. This development, coupled with increasing orders to withdraw units from the London Metal Exchange warehouses, suggests that China's demand slump may have bottomed out, contributing to the recent rebound in copper prices.

The global surplus of copper has also been a significant factor influencing the price trajectory. Macquarie Group analysts have noted that updates to demand and refined production have pushed the market to a surplus sooner than expected. This surplus is expected to linger for the next two years, limiting the upside for copper. Despite this, the metal has shown signs of resilience, with prices averaging $9,000 a ton for the rest of the quarter and $9,175 for 2025, according to Macquarie's projections.

The macroeconomic outlook and investor sentiment have also contributed to the copper price decline. Global investors have been tentatively returning to buying equities, bonds, and commodities, a week after markets collapsed on fears of a global economic slowdown. Copper rose late last week following signs of resilience in the US labor market, paring a fifth week of losses driven by fears over the global economic outlook. However, the upside for copper may be limited due to the global surplus, as Macquarie Group analysts have noted.

In conclusion, the recent rebound in copper prices can be attributed to a combination of factors, including shifts in investment funds' positions, China's demand dynamics, and the global surplus. As investors await clearer guidance from the macro economy and more inventory drawdowns, the metal's price trajectory remains uncertain. The upcoming policy briefing by China's Finance Minister is expected to provide valuable insights into the government's commitment to more capital spending, which could further influence copper prices in the coming months.