There's a risk that copper price volatility will be amplified amid a ramp-up in investor appetite for the red metal and an extremely tight physical market, leaving the sector seriously unprepared, Drakewood Capital Management's managing director said.
David Lilley, who founded the commodities investment management company, said during Fastmarkets' Copper Seminar that the metal is coming off a long bear market and money simply was not invested in the space."I'm not forecasting prices, but it is a dangerous environment where everything is pointing in the same way - the investors want [copper exposure], they haven't got it and the physical industry is really tight," he said. "I'm certainly nervous, whether nervous is the right word, that markets like copper which have largely been behaving rationally, could behave irrationally. I think that's something that anybody who runs a copper business has to think about," he said, noting the potential stresses on working capital that could arise. Copper prices have soared in recent months, with the three-month London Metal Exchange price reaching new multi-year highs above $9,550 per tonne, roughly double year-ago levels. According to Lilley, large sections of the investment community...