According to Tom Mackay, co-head of metals at trader IXM, funds specializing in metals have exhibited a cautious approach towards the recent copper price rally, which reached a 22-month peak this week, leading to a dampening of physical demand.
Mackay highlighted that while more metals-specific funds have adopted a bullish stance, they remain cautious, with some opting to exit their positions as copper prices surged from $8,300 to $9,500 within a short timeframe. He noted that the rally was primarily fueled by inflows from index and macro funds into copper, as opposed to traditional commodity investors.
The surge in prices has begun to impact physical demand, as evidenced by the elevated level of exchange copper stocks in leading consumer China, which have reached a four-year high. Despite the resumption of factory activity, copper stocks in warehouses monitored by the Shanghai Futures Exchange have continued to accumulate, deviating from the usual post-Lunar New Year trend of decline.
IXM, a Swiss-based commodity trader owned by China’s CMOC Group, has significantly reduced its exposure to aluminium due to weak returns and has shifted its focus to metals essential for the green transition, such as copper and nickel. Mackay emphasized that the fundamentals of copper concentrates are notably robust, with copper remaining the most substantial part of IXM’s trading book by volume.
Furthermore, Mackay highlighted IXM’s increased activity in nickel following the appointment of Kenny Ives, former head of nickel at Glencore, as chief executive. He underscored Ives’ deep understanding of the nickel business and the opportunities within the market, signaling a strategic shift for IXM towards enhancing its presence in the nickel sector.
Mackay, who joined Louis Dreyfus’ metals trading unit in 2005, played a pivotal role in building the copper book, which was later renamed IXM and acquired by CMOC.