Thread by @IvanaSpear

I've been following #copper for over 15 years at leading hedge funds including Citadel & Millennium.

Investors often underestimate the insights that copper prices provide as a barometer for the economy.

Here is what you need to pay attention to:

Because of its use across many sectors, copper is seen as a leading indicator of economic health.

Copper prices are the fist to react to any economic uncertainty.

But copper also plays a major role in "electrification" providing it with a long term demand support.

• Over 65% of the world's copper is used in delivering electricity
• EVs use up to 4x more copper than ICEs
• Renewable power gen uses 4-5 times more copper than fossil fuel

After a solid start to the year, #copper prices have stagnated as a result of the banking crisis and recession fears.

But the price just reflects current fundamentals/sentiment. Key to watch is price + direction of inventories.

If you have prices declining and inventories rising, that is a major red flag 🚩

Conversely, if you have poor sentiment (recession fears etc.), stable prices, and declining inventories, that can create a very favorable set up.

Shanghai stocks are down over one-third since their peak in February 23.

Copper stocks at LME are lowest since 2005.

This tells us that while demand may be depressed, sentiment is even worse, setting up for a potential price squeeze higher.

We are already starting to hear data-points of stronger than expected recovery in China (not gangbusters, but better than some companies had forecasted).

But the key will be if that is enough to off-set a weak US economy.

More details in my weekly now available on @SeekingAlpha
$FCX $RIO
seekingalpha.com/article/459391…