We've been keeping a close eye on copper of late. [Feb 2, 2010: Trader Who Called 1996 Crash in Copper Says Prepare for Another - Catastrophe Awaits] Funny thing, is despite rampant inventory build the earthquake in Chile (one of the world's largest producers of copper) allowed an opportunity for speculators to run in and ramp up the price Monday, even though the mines where copper is sourced were not near the earthquake zone, and were only offline for a day or two. But don't let facts get in the way of a good speculative trading opportunity.
Indications from China are that its huge copper inventory build is slowing ....as we've documented [Feb 9, 2010: China Copper Imports to Halve] And overnight we have some more confirmation of that as end demand is weak per the country's 2nd largest smelter. That said, our commodities markets seem to have very little to do with supply and demand anymore... it's all about financial innovation and making sure traders on a few desks can game the system. So perhaps copper can surge another 50% from here as the markets discount
Chinese stockpiling, European economic recovery, American house building surge errr... well we don't really need a reason in the new paradigm When prices no longer are connected with what is happening on the ground - copper can go wherever Goldman needs it to go to ensure another quarter of 98% winning percentage. [Nov 4, 2009: Goldman Sachs Q3 Winning Percentage: 98.4%]
- Copper demand in China, the world’s largest consumer of the metal, is “weak” because of lackluster consumption from the power industry, Tongling Nonferrous Metals Group Co. said.
- “From what we learned from our customers, copper demand is now weak,” Chairman Wei Jianghong said today in an interview in Beijing. Tongling is the country’s second-largest copper smelter. “About 60 percent of copper is used in the power industry, and our sales to wire-and-cable users reflected that demand is rather weak,” Wei said.
- Demand “isn’t very strong,” Li Yihuang, chairman of bigger rival Jiangxi Copper Co., also said today.
- Slowing demand in China may indicate stockpiles in the country may continue to climb after reaching the highest level in more than seven years in February.
- Copper stockpiles jumped to 149,478 tons for the week ended Feb. 26, 28 percent more than the week ended Feb. 12, according to the Shanghai Futures Exchange.
Stockpiles up 28% versus 2 weeks ago? 7 year highs? No worries! Pricing in markets - commodities or stocks - is not about old fashioned supply and demand anymore. It's about central banks and government force feeding liquidity into the system and driving up asset prices via easy money speculation. Boo Yah.
- “The demand is not very strong in the first place,” Jiangxi Copper Chairman Li said in Beijing while at the congress. “But a lot of people have long positions in the market, so I think in the first half of this year, copper prices will be good.”
Well as long as a lot of people have long positions who cares if there is a need for the red metal. Just keep building warehouse to store it (our top 2 oligarchs, JP Morgan & Goldman Sachs have just bought a base metal warehouse company in fact a few weeks ago - I kid you not) and let's keep the party going...
- Traders say the bank decision will reshape the close-knit warehousing industry as Goldman Sachs and JPMorgan will control the depots where more than half of the LME’s registered stocks are held. The LME is the world’s largest metal exchange.
If there is one thing that comforts me, it's our 2 investment banks controlling every facet of the commodities market, from trading to storage. I am sure there will be no ill effects from this based on precedent in every other market they have touched ;) [Jul 17, 2009: Jon Stewart - the Pyramid Economy, with Goldman Sachs as the Eye] Look for a 'black swan' event in commodities circa 2017 ....
Rinse. Wash. Repeat.