Copper prices have surged to nearly $11,800 per ton, marking a 33% increase since the start of the year. China’s exports have also shown strong growth, rising by nearly 6% compared to last year, which led to China’s third-largest monthly trade surplus. Recent statements from the Politburo have fueled expectations for economic support in China, the top market for copper sales. While overall copper figures provided limited encouragement, there was a notable improvement in copper ore imports, which increased by almost 13% from last year and nearly 8% in the first eleven months. However, China’s refined copper production rose by 12.5% until October, outpacing copper ore imports and contributing to material shortages at smelters. Imports of copper and its products dropped below 430,000 tons in November, the lowest level since February. In the first eleven months, these imports were down 4.5% compared to last year. Despite increased production, China continues to be the largest importer of refined copper, representing 42% of global imports in 2024, according to the Australian Department of Industry, Science and Resources. With copper reaching a new high of nearly $11,800, market sentiment appears very strong, largely driven by robust Chinese export statistics. This rally has been significant, with prices climbing 33% since the year began. Traders with long positions have seen notable profits from this trend. However, it’s important to remain cautious of warning signs beneath the surface. In November, China’s imports of refined copper and copper products fell to their lowest point since February. This is concerning because it suggests that demand within the world’s largest consumer is not as robust as prices might indicate. Supporting this concern, data from the London Metal Exchange shows that warehouse stockpiles have increased for three consecutive weeks, exceeding 115,000 tonnes. Additionally, last week’s Caixin survey for China’s construction sector slipped to 49.2, indicating a downturn in a major copper-consuming industry. These factors do not suggest a market with booming physical demand. A similar situation unfolded during the bull run of 2021 when sentiment and expectations for stimulus drove prices to record highs, even as physical demand indicators weakened. That rally was followed by a significant price drop over the following year. Given the soaring prices and these clear warning signs, traders should consider using options to safeguard their existing long positions. Buying downside protection, such as put options that expire in January or February 2026, could help lock in recent profits. This strategy allows traders to benefit from any future price increases while managing the risk of a sharp decline. Alternatively, for those who believe this rally may be approaching its peak, strategies that profit from a price stall could be effective. Selling call options with strike prices at or over $12,000 could generate income, based on the idea that a new psychological limit is being established. The key takeaway is that the gap between the hot paper market and the cooling physical market is now too significant to overlook.

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