Copper’s barnstorming rally is showing signs of slowing, one day after reaching an all-time high, with investors cautioning its rally may have been running ahead of weak fundamentals for refined metal. 

Three month copper futures are trading slightly lower than Monday’s official closing price of US$10,889 a ton, having hit an all-time high earlier that day - the latest high-water mark in a months-long rally driven by financial investors betting on deepening supply shortages.

Many participants in the physical trade have been warning that prices were running ahead of signals of underlying market conditions. Demand remains relatively tepid - especially in top buyer China, where inventory levels remain high and suppliers of copper wires and bars have been cutting output.

China’s economic struggles remain in the spotlight, with fresh data showing there’s little sign of a turnaround in its debt-plagued property industry. The ailing sector has been a major drag on consumption in the top metals-consuming country.

Tuesday’s steadying came after banks, miners and investment funds have been touting copper’s bright long-term prospects. A flood of investment into the market over the past few weeks had piled pressure on bearish traders, who have taken a more cautious stance owing to weak spot demand, particularly in China. 

The metal’s rally went into overdrive last week as a short squeeze on the New York futures market triggered a global rush to secure the metal. The spread between front months has since eased. 

While the Comex short squeeze may continue, there were risks of a rapid retreat in copper once funds exited or made delivery, Guangzhou Futures Co said in a note. The broker cautioned investors against chasing the rally.

Copper traded 0.3% lower at US$10,861 a ton on the London Metal Exchange (LME) as of 9.39am London time on Tuesday. Other base metals were mixed, with aluminium up and tin declining.

Producer Rio Tinto has declared force majeure on supply of alumina cargoes from its refineries in Queensland, Australia. Meanwhile, a further 81,500 tons of aluminium have been cancelled out of LME warehouses in Asia.

  - Bloomberg