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Copper has the feel of a market getting a reality check. Last year ended on a very positive note with bulls hopeful that another year of deficit lay ahead. But so far there has been no sign of tightness, and that situation did not change throughout March, leaving bulls disappointed.

Exchange inventories keep rising, especially in China where SHFE stocks levels have doubled this year already; premiums are soft; Chinese refined production surged 7.4% year-on-year in January-February despite smelter outages; and mine supply disruptions have been modest. Investors have backed off, reducing net length 24% by mid-March and dragged prices below $7,000 per tonne. It is too early to get overly bullish on copper yet. Big bullish changes are on the way – electric vehicles and acute concentrate shortages – but both are medium- to long-term themes. The sleeping copper bull will wake, but not until H2 2018 at the earliest and only if supply disruptions flare up. Until then, expect range-trading.

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