A long-expected surplus in copper markets is pushing the forward curve into contango for the first time since the end of 2013 - a shift that is expected to redirect corporate hedging strategies and capital expenditures. Spot copper prices fell below prices for future delivery in three months - a state known as contango - on February 11 following a 19.7% drop in spot prices from end-November to beginning February. Prices have recovered 6% since then -currently sitting at US$5,766/tonne - and moved back into backwardation, but analysts expect contango to take hold and widen in the coming months. The shift is likely to force corporate producers to re-think capital expenditure and sales strategies. "Lower outright prices are generally bad for producers but with an upward-sloping forward curve you would expect some of them to move into hedging through forward sales," said Robin Briar, metals analyst at Societe Generale.
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