Changpeng Wan
The Copper Market’s Dramatic Intraday Shift
This afternoon, global commodities markets witnessed a significant anomaly: copper prices surged vertically within minutes. Traders scrambling to adjust positions saw LME copper spike over 1% to hit $9,984 per ton, while COMEX copper futures jumped nearly 2%. This abrupt afternoon surge caught many investors off guard amid what had seemed like routine mid-session trading.
Simultaneously in China, key players like Yunnan Copper, Jiangxi Copper, and Tongling Nonferrous Metals saw stocks rocket to daily highs as futures shot upward across base metals. Gold and silver joined the rally with Shanghai futures climbing over 1%. Market chatter immediately centered on one urgent question: What specific catalysts triggered this explosive afternoon surge?
Two converging forces emerged as prime suspects: advanced voting on critical US legislation that could flood markets with liquidity, and continued dollar weakness following dismal FX performance. Understanding these dynamics requires unpacking both immediate triggers and underlying fundamentals driving what analysts now describe as an overheating copper market.
The “Big and Beautiful” Act’s Market Influence
Around 9 AM Eastern Time preceding the copper rally, US Senators began voting on the contentious “Big and Beautiful” Act. Republican leaders pushed aggressively for passage, betting the massive spending package could stimulate infrastructure development – historically a copper-intensive activity. Crucially, the timing coincided precisely with China’s afternoon trading session.
The proposed legislation features staggering fiscal implications:
– Estimated 7%-8% annual deficit rates over the next decade
– Potential spikes to 9%-10% deficits based on Congressional Budget Office forecasting variances
– Expected $2 trillion liquidity injection starting July/August
Trump administration strategists argue this would enforce “financial suppression” via debt monetization, deliberately weakening the dollar to boost commodities.
How Legislative Confidence Transformed Sentiment
Market psychology shifted as procedural updates filtered through:
– Earlier Republican resistance dissolved into broad support
– Vote counting suggested likely passage before Asian markets opened
– Commodity traders positioned anticipating dollar depreciation
The resulting optimism flooded metals markets minutes before closing bell. This afternoon surge reflected instant repricing of copper’s fundamental outlook on stimulus expectations.
The Dollar’s Historic Downtrend Amplifies Gains
Copper’s rally coincided with the dollar index plunging below 97 – its lowest level since February – capping a historically poor first-half performance with 10% depreciation. Goldman Sachs analysts captured the shift, revising Fed rate projections:
– Previously: Single 0.25% cut expected December 2025
– Revised: Three 0.25% cuts starting September 2025
The dovish pivot reinforced copper’s appeal as:
– Weaker dollars lift commodity values denominated in USD
– Interest-sensitive industrial metals gain from cheaper financing
Historical parallels stand out: The dollar’s first-half collapse marks its worst performance since 1973, while copper typically thrives under such monetary conditions. These macro currents converged to accelerate the afternoon surge.
Copper Fundamentals Signal Structural Tightness
Beyond global events, copper faces robust supply-demand pressures:
– Declining LME inventories despite consistent Asian warehouse inflows
– TC/RC fees collapsing amid concentrate shortages
– Scant mining CAPEX constraining medium-term supply growth
Maike Futures notes dual macro-fundamental strength:
“Copper prices benefit from synchronized policy tailwinds: anticipated US fiscal expansion, plus China’s infrastructure stimulus boosting factory demand.”
The Inventory Squeeze and Tariff Overhang
COMEX’s abrupt spike exposed competing tensions:
– Short-term squeeze dynamics as LME positions tighten
– Tariff risk if US imposes threatened 25%-55% duties
Market mechanics intensified volatility:
– Cash-to-3-month spreads exceeded $1,500 premiums
– Speculators front-ran possible tariff implementations
“Positions turned instantly overcrowded,” noted a Singapore-based metals trader. “Afternoon liquidation risks now threaten exaggerated downside swings.”
Divergent Analyst Views on Copper’s Path Forward
CITIC Securities projects measured optimism:
– Year-end target: $10,000-$11,000/ton
– Key supports: Chinese fiscal stimulus and US economic resilience
– Primary risk: Potential July tariff escalations
Goldman Sachs issued more aggressive recalibrations:
– Raised 2025 average forecast by $750 to $9,890/ton
– August peak projection at $10,050
Recommended trades:
“Go long December COMEX-LME spreads… markets underestimate tariff probability by 25%-50%.”
Key variables influencing trajectories:
1. “Big and Beautiful” final vote outcome
2. Proportion of infrastructure spending targeting copper-heavy projects
3. Dollar depreciation momentum
4. Sino-US tariff implementation timing
Strategic Responses to Copper’s New Volatility Regime
This afternoon surge fundamentally alters risk parameters for metals traders. Actionable approaches include:
Near-term Physical Hedging
– Producers: Lock current prices via fixed contracts
– Consumers: Accelerate procurement before tariff impacts
Exchange Arbitrage Plays
– Exploit COMEX/LME dislocation via calendar spreads
– Monitor SHFE/LME ratio shifts
Positioning Around Catalysts
– Build exposure pre-votes on US spending bills
– Reduce leverage when tariff deadlines approach
Risk aversion now seems prudent, considering:
– Copper’s daily volatility exceeds 230% historical average
– Over 32% speculative positioning increase
The Commodity “Super Squeeze” Phenomenon
Recent copper movements resemble earlier nickel and zinc incidents
Forecasting Copper’s Next Moves
Watch these indicators for directional signals:
US Legislative Calendar
– Final “Big and Beautiful” vote tally
– Reconciliation negotiations timeframe
Chinese Industrial Activity
– July manufacturing PMI (due August 1)
– State grid tender volumes
The Dollar Index
– Breach below 96 triggers copper breakout
Inventory Flows
– Critical LME warehouse withdrawals
– Cancelled warrant levels
Should US deficits balloon above 9%, analysts anticipate persistent upward copper pressure. However, tariffs causing demand destruction could force swift reversals. Traders must balance both scenarios.
Smart exposure adjustments prioritize flexibility:
– Scale into positions on 3%-5% pullbacks
– Maintain cash reserves for volatility opportunities
– Utilize futures options for asymmetric upside bets
Events proved how single afternoon surges can reset markets. Stay vigilant, stay diversified, capitalize responsibly on copper’s structural story.
