Well, if we are truly and legitimately below production costs - then both commercial producers and users will be buying forwards in here...
Been extremely busy week in many instruments for me and I can't get out of my position Copper as to my rules, but seeing Copper going beyond three deviations other day, did few Put credit spreads, but staying short as am expecting Copper to rebound from here, unclear if exhaustion bottom was sustained, but I am doubting it, guessing it will rally to 3.0 and bounce back down. Next support is 1.52 from 2008. Will sell rallies. I don't use fundamentals at all cause they never worked for me, numbers are fudged all the time.
Yep, this could happen....until the producers go out of business. Can you fathom Rio Tinto filing bankruptcy ?
I am needing Copper to go a bit higher to sell more of it and of course hedge when I do, still holding Put credit spreads till I add shorts. Still expect lower prices.
Ended up breakeven on hedge and stopped out at very small profit of ten bucks on futures. I did it all again of going short May at 2.76, no hedge
I have taken more stabs of adding onto shorts, hedging most of the time, sell upper BB, taking off half at lower, I still don't Copper low enough to consider getting out of shorts, so just keep doing rollovers.
Patience required here with all of the undercurrents.....the Shanghai index near all time highs, the Fed interest rate hike looming large. A short on copper is a bet against China. I think it's a good bet soon.
Just be prepared for that day when there will be a massive short-covering rally. We are so under the cost of production, soon there will be no production.