Persistent physical supply tightness in China and aggressive pre-holiday restocking have injected fresh momentum into global copper benchmarks. On the London Metal Exchange, copper secured a six-session winning streak on Tuesday, marking its longest unbroken advance since May, before seeing a modest pullback on Wednesday morning. Consumption has received a notable boost from seasonal manufacturing schedules ahead of the Mid-Autumn Festival and National Day holidays, creating a resilient price floor despite fluctuating macro sentiment.
Shanghai Cathode Stocks Plunge to Lowest Level Since December 2023
Depleting onshore reserves in China highlight the underlying friction in physical delivery channels. Inventories of copper cathode monitored in Shanghai tumbled by 14,700 tonnes to stand at 43,900 tonnes, touching their lowest recorded point since December 2023. While customs flows show incoming shipments of imported copper have picked up, arriving metal has moved directly into manufacturing and fabrication plants rather than accumulating inside bonded warehouses. As a consequence, spot supplies across exchange-monitored hubs remain exceptionally constrained.
Base Metals Positioning Softens Across Paper Contracts
Despite resilience in physical cash trades, speculative participation across derivative markets tells a distinctly more defensive story. The latest Commitments of Traders Report data indicates that net bullish copper positions declined by 3,981 lots to 42,132 lots. This reading marks the lowest net long exposure seen since late March and represents a sixth straight week of position liquidation in the face of rising physical prices, as observed by commodity analysts Ewa Manthey and Warren Patterson.
This hesitation among institutional traders extends across the broader base metals complex. Net long positions in aluminium dropped sharply by 11,623 lots to 77,423 lots, largely reflecting widespread long liquidation. Similarly, zinc net longs fell by 2,787 lots to settle at 29,946 lots, marking a fourth consecutive weekly retreat in speculative exposure.
Currency Pressures and Global Central Bank Developments
Wider macro dynamics have added crosswinds to industrial commodities, with the foreign exchange complex reflecting divergent economic data and policy moves. The AUD/USD cross met renewed selling pressure, testing 0.7100 during Wednesday's Asian trading window. Australia's flash PMI readings pointed to a contraction in manufacturing alongside sluggish services expansion for a second consecutive month, while a buoyant US Dollar added headwinds ahead of the scheduled Trump-Xi summit on Thursday. Traders appeared largely indifferent to the conclusion of indirect talks between the US and Iran.
The USD/JPY currency pair traded in the mid-157.00 region, near two-week highs, influenced by the Bank of Japan's interest rate decision. The Bank of Japan raised its short-term policy interest rate target from 1.00% to 1.25% in a 7-2 vote, advancing its policy normalisation pathway as widely anticipated. However, a dovish communication tone continued to weigh on the Japanese Yen, while the US Federal Reserve's hawkish posture bolstered the US Dollar. In precious metals, rising expectations of further Federal Reserve rate hikes drove XAU/USD down by 1.0% on the day to trade around $4,315.
