Copper prices rise to fill the gap, with intense battles between bulls and bears over position increases and pressure levels.

In April, copper prices continued to rise, filling the gap, with long and short funds increasing positions near the resistance level, and short positions increasing to defend the resistance level. As copper prices rose, the domestic most-traded contract shifted from short to long, maintaining a small long exposure; international financial and industrial capital reduced both long and short positions, slightly shrinking the exposure scale. Market bullish sentiment recovered, and the options market predicted that copper prices in May would operate within the range of 70,000 yuan to 80,000 yuan/mt.

Long and short positions increased fiercely, with short positions increasing to defend the resistance level. On the SHFE copper futures market, on April 7, longs accelerated their exit, and copper prices hit the lower limit at 73,640 yuan/mt; in mid-April, shorts took profits and longs increased positions, driving copper prices to rebound sharply, approaching the resistance range of 78,500 yuan to 79,500 yuan/mt; in late April, long and short funds increased positions near the resistance level, with shorts increasing positions to drive down prices. On the LME copper futures market, in April, shorts increased positions, driving prices down to a low of 8,105 $/mt, after which some shorts took profits and exited, driving copper prices to rebound to the resistance level of 9,500 $/mt, with long and short positions showing fierce increases. On April 30, the SHFE copper closing price was 77,220 yuan/mt, down 3.4% from 79,950 yuan/mt in the same period in March; the LME copper closing price was 9,125 $/mt, down 6% from 9,710 $/mt in the same period in March.

Domestic most-traded contracts shifted from short to long, while international financial and industrial capital reduced both long and short positions. On April 30, the top 20 futures companies in SHFE copper held a net long position of 5,316 lots, compared to a net short position of 4,496 lots in the same period in April, with domestic most-traded contracts shifting from short to long, and the reduction of short positions by domestic most-traded contracts being an important force driving copper prices higher. On May 2, LME copper commercial institutions (including producers, traders, processors, users, and other industrial clients) held a net short position of 60,001 lots, narrowing the short exposure by 4,895 lots compared to the same period in April, while investment funds held a net long exposure of 31,505 lots, narrowing the long exposure by 10,072 lots compared to the same period last month.

Market speculation risk is at a medium level. On April 30, the open interest of the most-traded SHFE copper contract was 169,000 lots, and the copper inventory in SHFE designated delivery warehouses was 89,000 mt, with the ratio of open interest to delivery warehouse inventory at 9.4, at a medium-high level; the open interest of LME 3-month copper was 287,000 lots, with inventory at 200,000 mt, and the average monthly deliverable production at 1.41 million mt, with the ratio of open interest to the sum of exchange inventory and production in the next three months at 1.6. Considering comprehensively, LME copper open interest is at a low level, inventory is relatively abundant, and market speculation risk is at a medium level.

Copper prices are at a medium-high position within the long-term price range. The long-term operating range of SHFE copper futures prices is 41,000 yuan to 89,000 yuan/mt, and the long-term operating range of LME copper futures prices is 5,100 $ to 11,100 $/mt. On April 30, the closing price of the most-traded SHFE copper contract was 77,220 yuan/mt, positioned at the 75th percentile of its long-term price range. The closing price of LME copper futures was $9,125/mt, positioned at the 67th percentile of its long-term price range.

Copper prices continued to rise, filling the gap. In mid-April, copper prices rebounded sharply and continued to climb, with SHFE copper prices reaching the upper end of the 71,000-79,500 yuan/mt range, essentially filling the previous gap. In the short term, there was intense competition between bullish and bearish capital, causing copper prices to fluctuate rangebound within the 76,500-78,500 yuan/mt range. LME copper prices fell rapidly, breaking below the lower end of the 8,700-dollar/mt oscillation range. After finding support near $8,100/mt, prices rebounded strongly, returning to around $9,500/mt.

LME copper backwardation persisted between far-month and near-month contracts. Recently, spot resources have gradually tightened from a previously loose state. On April 30, the most-traded SHFE copper far-month contract was trading at a backwardation of 2.6% compared to the near-month contract. The LME copper far-month contract was trading at a premium of $6.8/mt over the near-month contract, indicating parity. The LME copper Cash/3M spread was at a premium of $55.16/mt, up $50.11/mt from the same period in March, reflecting a gradual tightening of spot resources in the near term.

Market bullish sentiment has recovered somewhat. The options market expects copper prices to mainly operate within the 70,000-80,000 yuan/mt range in May. After a sharp rise to historical highs in April, the implied volatility of SHFE copper options quickly pulled back, maintaining a level slightly above the midpoint of the past six months. On April 28, the implied volatility of SHFE copper options closed at 23.33%, with the market expecting a high probability of copper prices remaining rangebound. From the perspective of the strike price with the highest open interest in SHFE copper options, on April 28, the strike price with the highest open interest for Cu2506 put options fell sharply to 70,000 yuan/mt, with an option premium of 276 yuan/mt. The strike price with the highest open interest for call options was 80,000 yuan/mt, with an option premium of 628 yuan/mt. The market expects copper prices to mainly operate within the 70,000-80,000 yuan/mt range in May. In terms of options open interest, on April 28, put open interest was 36,975 lots, a decrease of 4,117 lots from the same period in March. Call open interest was 31,230 lots, a decrease of 9,754 lots from the same period in March. The Put-Call Ratio (PCR) of open interest closed at 1.18, an increase of 0.18 from the same period in March, reflecting an increase in bullish sentiment in the SHFE copper market. (Author's Affiliation: China Metal Mining Economics Institute)