Fund managers appear to have closed their copper trading books early this year. Speculative positioning on both the London Metal Exchange (LME) and CME copper contracts has fallen sharply since October"s frenzied trading, which saw LME three-month metal spike up to $10,452.50 per tonne amid unprecedented time-spread turbulence. The market has since calmed. The premium for cash copper, which flared out to $1,103.50 per tonne before the LME stepped in to limit the backwardation, closed Friday valued at flat. The three-month price has spent the first half of December trading languidly either side of the $9,500 level, last at $9,498 per tonne. LME inventory has risen from the extreme lows seen in October, but there has been no sign yet of the mass deliveries threatened by China"s producers. Was it a bluff? Or is the metal on a slow boat from Shanghai? This game of copper stocks poker may not be over yet, but the added uncertainty has persuaded funds to fold their cards and call it quits on copper for the rest of the year. CUTTING LENGTH Money managers are still collectively net long of the CME copper market but bull positioning at 13,945 contracts is close the year"s low of 12,956 registered in August. Outright long positioning has been slashed from 82,538 contracts in October to 50,045, the lowest level since the second quarter of last year, when the world was still recovering from the first COVID-19 hit. Short positioning remains historically muted at 36,100 contracts, funds evidently still reluctant to bet against copper even at these elevated price levels. It"s worth noting that open interest on the CME copper contract, which has a higher speculative profile than the LME product, has imploded since October and is now also back at levels last seen in the first half of 2020. LME open interest has held up better but funds have been leaving the London market as well, the collective net long position contracting from 39,577 lots at the height of the October turbulence to 28,154 as of the latest Commitments of Traders Report. LME broker Marex, which uses its own methodology to track fund positioning, thinks the fund liquidation has been even more extensive, assessing speculative positioning on the London copper market as flat to net small short. The overall picture is the same, however. Copper and base metals trading "has become highly illiquid, with the heavy risk reduction reflected in the very light positioning", Marex noted in Monday"s daily report. CME copper interest slumps back to Q2 2020 levels CME copper interest slumps back to Q2 2020 levels SQUEEZE OVER, BUT WHAT HAPPENED? There"s a lot of uncertainty clouding the big picture for copper next year. Take your pick from China"s struggling property sector, U.S. interest rates or the Omicron variant. But October"s ferocious squeeze has muddied copper"s micro waters as well. China"s copper smelters let it be known they planned to deliver metal against the LME squeeze, something they have done in times of past LME tightness. LME time-spreads have since obligingly collapsed. The only problem is that there is no sign yet of any Chinese copper making its way to the LME. China"s exports totalled just 11,200 tonnes in October, the lowest monthly print since the middle of last year. The preliminary figures for November didn"t include exports but they did show an acceleration in imports, which is counterintuitive if China has sufficient copper to ship it to the LME. There"s been scant evidence of Chinese exports in LME stock movements. Headline stocks bottomed out at 74,225 tonnes last week and have since edged up to 84,450 tonnes. More importantly, available open tonnage has rebuilt from just 14,150 tonnes in October to a current 80,350 tonnes. However, the copper sucked into the LME system by October"s freak cash premium has largely arrived at European and U.S. locations. Deliveries onto LME warrant have totalled 56,575 tonnes since the start of November, of which 27,675 tonnes have entered Hamburg and Rotterdam and 17,525 tonnes New Orleans and Baltimore. Arrivals in South Korea and Taiwan, both obvious shipping destinations for Chinese exports, have totalled just 7,875 tonnes and 2,350 tonnes respectively. It"s quite possible that constraints on shipping capacity have slowed the export response but the absence of big inflows at LME locations in Asia has led to speculation the collapse in LME time-spreads may have been the result of a financial rather than physical settlement. The threat of big-volume Chinese deliveries still hovers, however, and there is a sense of suspended animation around the copper price until things become clearer. LOW COVER The clear-out of LME stocks in the run-up to the October mayhem and the limited nature of the subsequent rebuild leaves the copper market looking vulnerable to further inventory shocks. Global exchange stocks, including those held in CME and Shanghai Futures Exchange warehouses, ended November at 173,713 tonnes, the lowest end-month tally since 2008. Nor is there much sitting in the LME off-warrant shadows - just 20,702 tonnes at the end of October, the lowest since the exchange started releasing this monthly information in February last year. Copper seems set to enter 2021 with the lowest visible inventory cover in a decade. Unless, of course, resupply is on its way from China. But until the market finds out, funds seem to have decided the safest way to play this particular poker game is to leave it. Editing by Jan Harvey Our Standards: The Thomson Reuters Trust Principles.