Navigating Commodity Volatility: Andurand's Copper and Cocoa Bets Under Geopolitical Fire

The global commodities markets in 2025 are a theater of extremes. While structural demand for copper and cocoa appears robust, speculative bets by firms like Andurand Capital Management highlight the perils of navigating a landscape riddled with geopolitical tensions, tariff wars, and supply-side fragility. These markets, once seen as stable, now expose investors to systemic risks that could amplify volatility and erode capital.

Copper: The Green Metal's Tariff-Driven Turbulence

Copper, the lifeblood of the energy transition, has become a political battleground. The U.S. tariffs on semi-manufactured copper products—50% on wire and tube—effective August 1, 2025, triggered a 20% collapse in CME copper futures. This move, framed as a national security measure, disrupted a $500,000-metric-ton-a-year supply chain. Traders who had anticipated tariffs on refined copper found themselves with a U.S. warehouse glut of 232,195 tons, while China's exports of refined copper surged to 260,000 tons between March and June—a fourfold increase.

Andurand's long copper position, a cornerstone of its portfolio, has not been immune. Despite the firm's bullish thesis on a “decade-long supply crunch,” prices have retreated 15% from their May 2025 highs. The firm's forecast of $15,000/tonne by year-end and $40,000/tonne in five years clashes with a reality of oversupply and shifting trade flows.

The U.S.-China trade war further complicates the outlook. China, which consumes half of global copper, faces manufacturing slowdowns and export restrictions on recyclable scrap. Meanwhile, the U.S. aims to force domestic sales of copper input materials, with requirements rising from 25% in 2027 to 40% by 2029. These policies, while intended to secure supply chains, risk creating artificial bottlenecks.

Cocoa: A Sweet Spot Amid Structural Deficits

Cocoa, a soft commodity often overlooked in macroeconomic debates, has become a high-stakes play for Andurand. The firm's long thesis hinges on a projected deficit of 650,000–700,000 metric tons in 2025, far exceeding the International Cocoa Organization's 439,000-ton forecast. Poor harvests in Ivory Coast and Ghana—driven by El Niño, disease, and fertilizer shortages—have tightened supplies. Prices surged to $12,000/ton in April 2025 but now trade at $7,800, reflecting profit-taking and lingering doubts.

Yet Andurand remains undeterred, citing a “structural bull market” fueled by inelastic demand and dwindling inventories. The firm warns that if production fails to recover, cocoa prices could revisit the $28,000/ton levels of the 1970s. However, this optimism clashes with geopolitical headwinds. The U.S. has imposed a 15% tariff on processed cocoa products, while tensions with Brazil—a coffee-focused but cocoa-linked trade partner—threaten retaliatory tariffs on U.S. agricultural goods.

Systemic Risks and the Cost of Speculation

Andurand's bets expose the fragility of concentrated positions in illiquid markets. Its flagship fund, the Commodities Discretionary Enhanced Fund, has lost 60% year-to-date in 2025, a stark reversal from its 50% gain in 2023. The firm's lack of strict risk limits and reliance on high-leverage positions in copper and cocoa have amplified losses.

The cocoa market, in particular, has become a casino. With open interest and liquidity collapsing, price swings are now driven by speculative flows rather than fundamentals. A 13% inventory-to-grindings ratio—below historical averages—could trigger a surge if production fails to recover. Similarly, copper's role in AI and green energy has made it a political pawn, with tariffs and export controls reshaping supply chains overnight.

Investment Lessons: Diversify, Hedge, and Monitor

For investors, the Andurand saga underscores the dangers of overexposure to commodities under geopolitical stress. Key takeaways include:
1. Diversification: Avoid overconcentration in a single commodity or region. Copper and cocoa are sensitive to trade policies and supply shocks.
2. Hedging: Use futures and options to mitigate downside risk, especially in markets with low liquidity.
3. Scenario Analysis: Model the impact of tariffs, retaliatory measures, and supply disruptions. For example, a 50% U.S. tariff on refined copper could erase $3,000/tonne from prices.
4. Sustainability Focus: Invest in producers with resilient supply chains, such as vertically integrated firms or those with diversified sourcing.

Conclusion: Balancing Bullish Theses with Risk Discipline

Andurand's copper and cocoa positions highlight the tension between long-term structural trends and short-term volatility. While the firm's vision of a $40,000/tonne copper price or $20,000/tonne cocoa price may materialize, the path is fraught with geopolitical and tariff-driven uncertainty. Investors must balance conviction in fundamentals with prudence in execution—leveraging derivatives, diversifying portfolios, and staying agile in a world where policy shifts can redefine markets overnight.

In an era where commodities are as much political instruments as economic assets, risk management is not optional—it's a survival strategy.