Copper open interest declined to the lowest level in almost two years on the London Metal Exchange, suggesting traders are closing out bets.
Investors probably closed out bets on higher prices as market open interest in LME futures declined by 11,531 contracts to 414,375 lots in the week ended May 15, according to bourse figures. That’s the lowest level since June 23, 2010. The exchange’s benchmark contract for three-month delivery dropped 4.1 percent in the period.
“These are pretty unprecedented times,” said Robin Bhar, an analyst at Societe Generale SA in London. “It’s not wholly surprising to see liquidation and pressure on prices.”
Concern that the U.S. economy is struggling to sustain its momentum and that Greece may exit the euro drove copper to a four-month low. Mario Draghi, president of the European Central Bank, said for the first time this week that Greece may stop using the single currency.
Moody’s Investors Service lowered credit ratings at 16 Spanish banks and Fitch Ratings cut Greece’s credit rating on concern the country may not be able to sustain euro membership.
A combination of lower open interest and sliding prices suggests liquidation of bets on a rising market, according to Macquarie Group Ltd. Open interest, which includes positions held by LME clearing members only, declined to the lowest since July 2009 as of May 15. Each contract represents 25 metric tons of the metal used in wiring, pipes and roofing.
Open interest in aluminum, zinc, lead, nickel and tin also fell as prices declined.
Following are changes to market open interest for both LME members and their clients for the six biggest industrial metals.
Change in Price Change Open Interest (%) Aluminum -11,656 -1.6 Copper -11,531 -4.1 Zinc -3,297 -2.1 Lead -9,231 -3.9 Nickel -4,276 -2.1 Tin -258 -7.9
To contact the reporter on this story: Agnieszka Troszkiewicz in London at email@example.com
To contact the editor responsible for this story: Claudia Carpenter at firstname.lastname@example.org