Tight supplies from copper mines and the looming threat of a worsening global deficit rocketed copper prices from February to June, and the AI trade, which drove momentum from speculative traders, pushed prices even higher. But in recent weeks, prices have tumbled, breaking a critical trend line that has been intact for months. Now, prices are teetering on a knife-edge, with trading desks and hedge funds speculating on what comes next.

Let’s begin with comments from the world’s top copper trader – and as Bloomberg’s Jack Farchy puts it, “usually one of the market’s most bullish voices” – who called the price surge unjustified due to real-world supply. 

“Prices of non-ferrous metals have moved much higher than fundamentals in the physical spot market might indicate or justify, especially for copper,” Trafigura Chief Economist Saad Rahim wrote in a note with first-half results on Thursday. 

Rahim pointed out that copper’s speculative surge in the first half of the year was primarily linked to “investment flows.” However, he does believe the closure of First Quantum Minerals Ltd.’s mine in Panama will eventually tighten global supplies.

He wrote that sliding mine supply “has led to a significant concentrates shortage, resulting in smelters having to cut production and pointing to tighter inventories of refined metal even if demand is lackluster.”

Copper prices on the London Metal Exchange on Friday fell to $9,652 a ton, down 11.5% from the all-time high of $11,104 in May. Furthermore, prices have breached a multi-month ascending trend line, which is happening as the top consumer of copper, China, has printed dismal economic data.