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Copper long speculators are at risk of a price pull-back due to a delayed pick up in Chinese demand in its traditionally strong industrial consumption season in the second quarter.

Bullish investors, who poured money into copper eyeing a commodity super-cycle, have already reduced exposure amid fears of Chinese monetary tightening, a firm dollar and fresh coronavirus lockdowns in Europe.

“There’s no point having money in copper at this point because we’re not going anywhere,” said commodities broker Anna Stablum of Marex Spectron.

“The shorter-term money…has already disappeared and moved on to where you can make more short-term gains, but…there’s substantial sticky, longer-term money basically (still) sat in that long,” she said.

After surging close to its $10 190 record level in February, LME copper has since floated between $8 500 to $9 300 as the market lacks fresh bullish catalysts. But prices are still expensive for some copper users.

“Wire rod producers were impacted the most…(Their consumers) will not accept price increases that gives them the burden of production costs,” said CRU’s analyst He Tianyu, adding that cable makers might hold off purchase until mid-April.

Yangshan copper premiums dropped to $51.50 a tonne, its lowest since November 24, indicating slowing demand for imported metal into China.

Meanwhile, LME inventories nearly doubled in March and stockpiles in Shanghai Futures Exchange warehouses were near a seven-month high.

“We forecast substantial growth in copper supply from both mines and refineries…in 2021,” said Aurelia Britsch, head of commodities at Fitch Solutions. Britsch expects growth from the United States, Peru, Panama, the Democratic Republic of Congo and Indonesia.

Users also switched to the relatively cheaper scrap.

“The substitution effect from scrap is likely to lead to a lower total Chinese refined copper demand growth this year compared to the growth in 2020,” said Wood Mackenzie analyst Liu Zhifei.

Not everybody is pessimistic, however.

“The busy season of air conditioning in the second quarter will hold prices at high level. In the third and fourth quarters, prices may rise again if Western countries’ consumption pick up,” said a China-based copper trader.

Tube makers enjoy stable revenue from fixed processing fees, while rising costs are passed down to consumers, a tube producer said.

“Air conditioning plants raised their selling price to offset the impact of raw material costs. I don’t think the copper price will fall too much,” the tube maker said, pointing to abundant money supply from massive global stimulus.

Meanwhile, demand from the Chinese appliance and automobile sectors were better than expected, and consumption by construction and renewable energy industries is seen solid for the next few years, said Wood Mackenzie’s Liu.

Still, as the strong demand season in China looks set to be delayed, it becomes costly for copper bulls to keep rolling their positions.

Shanghai Dalu Futures, the Chinese broker that built up over $1-billion in copper bullish bets in just a few days in February, had by Friday cut its long positions in the April-July contracts by 40% from February 25 when prices hit near a decade high, visible ShFE data showed.

Physical players believe prices should be closer to $6 000 to $7 000 while the speculative market eyes beyond $10 000, said broker Neil Welsh at Britannia Global Markets, predicting prices to fall before seeking support at around $8 660 to $8 670.

“It essentially comes down to who will win between the physical players and the speculative community.”