COMEX Copper Futures Open Interest Hits Record High: Capital Battle Intensifies, China's Import Costs Under Pressure

Record Open Interest: Macro and Micro Logic Behind Capital Inflows

According to market data tracking agencies, COMEX copper futures open interest has recently hit a new all-time high, surpassing the previous peak set in 2021. This phenomenon reflects a fierce battle between macro capital and industrial players. On one hand, global manufacturing PMIs show divergence among major economies, but copper's role as the 'Dr. Copper' of industrial metals makes it a core tool for betting on economic recovery or inflation expectations. On the other hand, structural demand growth from the energy transition continues to fuel expectations of a long-term supply deficit.

From a capital flow perspective, CFTC positioning reports show that managed money net long positions have risen significantly in recent weeks, while commercial hedging positions have also increased, reflecting industrial demand for price volatility protection. This pattern of 'rising longs and shorts' often signals growing market divergence, with potential for increased volatility ahead.

Supply-Demand Fundamentals: Fragility Under Tight Balance

On the supply side, slowing global copper mine output growth is widely acknowledged. Major producing countries like Chile and Peru face declining ore grades, community protests, and delays in new project approvals, keeping concentrate supply tight. According to industry consultancy data, global copper mine output growth is expected to be only 2%-3% in 2024, below the average of the past decade. Meanwhile, China, as the world's largest copper consumer, maintains resilient demand from grid investments, new energy vehicles, and solar photovoltaic industries, further compressing inventory buffers.

Copper inventories on the LME and SHFE remain at historically low levels, while COMEX inventories continue to drain due to closed arbitrage windows. This combination of 'low inventories + high open interest' makes copper prices highly sensitive to any supply disruption or demand surprise. Market analysts note that events like mine strikes or smelter maintenance could quickly push prices through key psychological levels.

Impact on China's Import Costs: Dual Pressure from Exchange Rates and Premiums

As the world's largest copper importer, China faces rising import costs directly from COMEX copper futures' strong performance. Due to the linkage between domestic copper prices (SHFE) and COMEX, price increases driven by surging COMEX open interest transmit to domestic spot markets through import parity. Traders report that the Yangshan copper premium has recently risen, reflecting higher landed costs for imported copper.

Additionally, RMB exchange rate volatility exacerbates this impact. With the US dollar index hovering at high levels, the rise in dollar-denominated COMEX copper futures increases currency conversion costs for Chinese importers. For downstream processors, rising raw material costs are squeezing profit margins, with some small and medium enterprises reducing purchases or substituting with scrap copper.

Options Market Signals: Implied Volatility Indicates Risk Appetite

Alongside record open interest, implied volatility (IV) in COMEX copper options has also risen notably. According to options data analytics platforms, near-month at-the-money IV has climbed from around 20% at the start of the year to over 30%, approaching levels seen during the Russia-Ukraine conflict in 2022. This reflects options traders pricing in potential large swings.

From the skew indicator, out-of-the-money call options have higher implied volatility premiums than puts, indicating greater concern about upside risk. Some traders are betting that copper prices could break historical highs in the coming months, further fueling open interest expansion. However, high IV also raises hedging costs, potentially forcing some speculative positions to close before expiration, triggering short-term pullback risks.

Outlook: Battle Enters White-Hot Phase

Overall, the record high in COMEX copper futures open interest results from a convergence of macro expectations, supply-demand tensions, and capital sentiment. In the short term, the market is likely to remain highly volatile, with key variables including the pace of China's pro-growth policy implementation, changes in Fed rate cut expectations, and unexpected events in global copper supply. For investors, caution is warranted against the risk of a stampede from overcrowded positions, while monitoring whether options market implied volatility signals a turning point.