June 15, 2020 / 1:03 AM / 22 days ago

RPT-Copper trading volumes slide on CME, LME as funds withdraw

(Repeats June 12 story with no changes to text)

* May copper volumes slide 40% on CME, 26% on LME

* Funds slash risk profiles, pull back from new positions

* Shanghai copper activity robust, surges 21% in May

By Eric Onstad

LONDON, June 12 (Reuters) - Copper trading on the CME and London Metal Exchange tumbled last month as funds and speculators fled from high volatility during the coronavirus pandemic, but volumes shot up in top metals consumer China as lockdowns were lifted.

Dealing activity in copper - the metal widely regarded as an economic barometer of the global economy due to its industrial uses - has withered in the West and analysts expect it to remain weak after sharp swings on the market.

The CME Group, favoured by funds and other speculators, was hardest hit, with trading volumes in Comex copper futures and options plummeting 40% to 1.26 million contracts in May compared to last year.

The larger London Metal Exchange, the main venue for physical business from miners and industrial users, saw volumes slide 26% to 2.12 million lots last month, according to data from the exchanges.

“Many people were hurt on the downside and hurt on the upside as well,” said Gabriel Garcin, portfolio specialist of alternative and traditional investments at UBS in Paris.

“Now you end up today with less leveraged market participants who are not really willing to take huge amounts of new directional risk on these markets.”

Open interest - measuring the flow of money that remains in a contract - in CME’s Comex copper futures stands at the lowest levels since 2016.

Guy Wolf, global head of market analytics at commodities broker Marex Spectron, said there had been derisking across quantitative strategies.

Banks, mainly in the West, have formulated “risk premia” products for institutional investors that seek to boost returns using alternative assets such as commodities.

Speculators piled in with bearish positions as COVID-19 lockdowns cut demand for metals, pushing benchmark copper prices on the LME to a 45-month low of $4,371 a tonne on March 19.

Prices have since rebounded by about a third to around $5,800, but volumes and open interest have remained subdued.

Volumes were high in March across metals exchanges, surging 31.6% on Comex and 18% on the LME, reflecting increased bearish bets and withdrawal of participants.

In China, however, copper volumes have been robust, surging 21% on the Shanghai Futures Exchange in May after a 38% jump in April.

That reflects the fact that ShFE attracts a lot of small retail speculators, which have persisted in their trades, as well as increasing numbers of industrial players.

“Hedging activity for example is not as common yet in China so there is more room for growth of new participants,” an Asia-based trader said, adding that bargain hunters were also out in force in April.

The LME is owned by Hong Kong Exchanges and Clearing Ltd.

Additional reporting by Tom Daly in Beijing and Emily Chow in Hong Kong; Editing by Veronica Brown and Emelia Sithole-Matarise

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