Commodity Market Positioning & Flows_ Base metals drive a return to inflows as aluminum and steel are targeted for tariffs. Mon Feb 10 2025

Summary of J.P. Morgan Global Commodities Research Conference Call Industry Overview - The report focuses on the global commodities market, particularly base metals, energy, and agricultural commodities as of February 10, 2025 Key Points and Arguments Market Positioning and Flows - The estimated value of global commodity market open interest rose to approximately $1.50 trillion, up 1% week-over-week (WOW), driven by a rebound in industrial metals prices and inflows from Chinese markets reopening after the Lunar New Year [3][8] - Total net investor positioning across global commodity futures markets increased by 1.3% WOW, reaching $193 billion [3] - Inflows were concentrated in base metals ($8.6 billion WOW), grains & oilseeds ($3.2 billion WOW), and natural gas ($2.5 billion WOW), while there were significant outflows from crude oil (-$9.4 billion WOW) and precious metals (-$5.6 billion WOW) [3][4] Base Metals - The estimated open interest value of base metals markets increased by 8% WOW to $182 billion, with net inflows largely concentrated in copper (+$5.6 billion WOW) [6] - President Trump announced a 25% tariff on all US imports of steel and aluminum, which could impact aluminum prices negatively in the medium term due to potential weaker US demand [6] Energy Markets - The estimated value of open interest across energy markets decreased by 0.4% WOW to $651 billion, with crude oil experiencing both price-driven declines and contract-based outflows [3][21] - Natural gas open interest increased by $9.6 billion WOW, with strategists suggesting that a negotiated end to the Russia-Ukraine conflict could lead to increased Russian pipeline gas exports to Europe [3][36] Precious Metals - The estimated value of open interest in precious metals markets decreased by 1% WOW to $234 billion, with significant outflows in gold (-$5.7 billion WOW) [4][27] - Managed Money net length in COMEX Gold futures reduced by 1,000 contracts to approximately 209.5k contracts net long, with gold prices approaching the year-end target of $2,950/oz sooner than expected [4] Agricultural Commodities - The estimated open interest value in agricultural markets increased by 1% WOW to $356 billion, driven by inflows in soybean, soybean meal, and soybean oil [6][40] - A projected cocoa market deficit of -40,000 tonnes for 2024/25 is expected to lead to structurally higher cocoa prices, targeting $6,000/tonne when the market finds balance [6] Price Momentum and Trading Signals - Price momentum generally increased across commodity markets, with notable shifts to 'buy' signals for LME Aluminium, LME Nickel, and CBOT Wheat [6][48] - The report indicates a mixed outlook for various commodities, with some showing strong upward momentum while others face potential declines due to external factors such as tariffs and geopolitical tensions [6][48] Additional Important Insights - The report highlights the risk of disruptive US economic actions and the potential for a policy mix that may not favor business, particularly concerning tariffs and trade agreements [3] - The cumulative flows across all commodity markets reached approximately $75.7 billion over the week, indicating a robust trading environment despite some sector-specific challenges [9][45] This summary encapsulates the critical insights from the J.P. Morgan Global Commodities Research conference call, providing a comprehensive overview of the current state and trends within the commodities market.