RPT-COLUMN-Bruised funds retreat from copper after tariff turbulence: Andy Home

By Andy Home

LONDON, Sept 10 (Reuters) - A sense of normality has returned to the copper market now the threat of U.S. import tariffs on refined metal has been deferred.

Physical copper is still flowing into CME warehouses after the rush to move metal to the United States but the CME spot premium over the London Metal Exchange (LME) LMECMXCU1 is now stabilizing around the $100 per ton level, which is pretty much where it was before the tariff scare.

Fund managers, however, are still fighting shy of the metal after the roller-coaster ride in the first part of the year. Investor positioning on the CME copper contract shrank to a decade-low in August and has edged up only slightly since.

Investors remain net long but largely thanks to a complete collapse in short positions. Bulls, meanwhile, are only tentatively dipping their toes back in the water.

The tariff heat may have gone out of the market, but there is still little light on price direction as physical arbitrage flows muddy the fundamental picture.

Fund managers have evidently decided there is easier money to be made in other commodity sectors, particularly precious metals.

BEAR EXODUS

Fund positioning, long and short, on the CME copper futures contract sank to just 51,685 contracts on August 18, which was the lowest level of participation since 2013.

The mass departure of investors resulted in average daily volumes slumping by 42% to 53,776 contracts, the lowest activity rate since December 2021. Trading in the CME's main copper options contract fell even more, by 56% year-on-year.

Particularly noticeable has been the exodus of short-position holders among the investment community.

Outright short positions have collapsed from a February high of 72,858 contracts to just 11,792, the lightest bear positioning since 2011.

The first half of the year was a scary time to be short CME copper as the U.S. price soared to a record premium over the LME international price.

It wasn't easy being a bull either, given the extreme volatility in the U.S. premium trade.

Fund long positions are also much reduced relative to the first months of 2025. They hit a three-year low of 35,447 contracts last month but have since picked up to 46,443 contracts.

THE LURE OF GOLD

Funds are still evidently bruised from the tariff tumult and remain wary of copper, or at least the CME copper price, which will continue to be highly sensitive to any change in tariff policy.

President Donald Trump's administration has left the door open to a possible phase-in of refined copper import tariffs from 2027, which in Trump-time is a very long time indeed.

Nor is the copper market generating any clear technical signals, which are the lifeblood of momentum funds.

The London Metal Exchange (LME) copper price CMCU3 has been trading a $9,500-10,000 per ton range since May and the CME price HGcv1 is also now churning sideways after the tariff implosion at the end of July.

Fundamental signals have been distorted by the massive relocation of copper to the United States, where CME inventory of 277,400 tons is now higher than LME and Shanghai Futures Exchange stocks combined.

Until copper regains directional impetus, upwards or downwards, there are richer pickings for investors in the super-hot gold and silver markets.

By nominal value, managed money accounts now hold 47% of their total commodity exposure in gold and 7% in silver, according to Ole Hansen, head of Commodity Strategy at Saxo Bank.

With gold prices XAU= hitting another record high of $3,659 per ounce on Tuesday and silver XAG= trading above the $40-per ounce level for the first time since 2011, it could be a while before funds commit again to copper.

The opinions expressed here are those of the author, a columnist for Reuters.