Jeff Currie's Copper Thesis Stumbles Amid China's Economic Struggles

Jeff Currie's Bullish Copper Thesis Derailed by China's Economic Woes

Jeff Currie, a seasoned commodities analyst, was on Bloomberg TV on Tuesday, explaining how his bullish stance on copper, which he previously dubbed as "the most compelling trade I've seen in my 30-year career" in mid-May, has been significantly disrupted or delayed due to the escalating economic issues in China.

Currie's Initial Optimism for Copper

Currie, who previously led the commodities research at Goldman Sachs for almost three decades and now holds the position of chief strategy officer of the energy pathways team at Carlyle Group, was a guest on Bloomberg's Odd Lots on May 17. He was there to discuss why he believed copper was the best trade he had ever seen in his career. During that time, copper was trading at an all-time high of $11,104.50 a ton on the LME. Currie was extremely optimistic about the future of copper, stating: "It is the most compelling trade I have ever seen in my 30 plus years of doing this. You look at the demand story, it's got green CapEx, it's got AI, remember AI can't happen without the energy demand and the constraint on the electricity grid is going to be copper. And then you have the military demand. So unprecedented demand growth against unprecedented weakness in supply growth because we have not been investing, it's teed you up for what I would argue is the most bullish commodity that I actually, I just quote many of our clients and other market participants say, you know, it's the highest conviction trade they've ever seen."

Current State of Copper and Reasons for its Decline

Fast forward 3.5 months, and LME copper is trading just below $9,000 a ton. Currie was back on Bloomberg TV on Tuesday to explain that the increase in inventories in Asia and a downturn in the property market in the world's second-largest economy were some of the main reasons behind copper's fall. Currie stated that copper "still has a floor based upon that strong structural supply story, but it has a cap on the upside based upon that weakness in demand," he said, adding, "I would say $8,500 on the bottom, $9,500 on the top until we start to see the policy begin to create some strength in China."

Goldman Sachs Exits Long-Term Bullish Position on Copper

In the meantime, earlier this week, Goldman Sachs announced to its clients that it had exited its long-term bullish position on the base metal and cut its 2025 price forecast by nearly $5,000. This significant shift comes in the wake of weak economic data from China this summer and high levels of refined copper production being exported from the world's second-largest economy into global markets. Goldman's Samantha Dart and Daan Struyven informed clients that the "Copper rally delayed. In copper we've observed significant price elasticity of both supply and demand this summer. As a result, the sharp copper inventory depletion we had expected will likely come much later than we previously thought."

Significant Increase in LME Asia Copper Inventories

There has been a considerable rise in LME Asia copper inventories, indicating a substantial shift in the market.

Bottom Line

It's clear that the economic struggles in China have had a significant impact on the copper market, derailing what was once a bullish thesis. It's a stark reminder of how quickly market conditions can change and how interconnected global economies are. What are your thoughts on this development? Do you think the copper market will bounce back, or is this a sign of more significant issues to come? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is available every day at 6 pm.