copper inventories exploding

Discussion in 'Commodity Futures' started by silk, Nov 12, 2009.

  1. silk


    Strongest chart on the board is the chart of copper inventories at the LME.

    Never has copper traded above $3.00 with such high inventories. In fact, in past it has always traded toward $2.00 or lower.

    Also, never have copper stocks FCX and PCU traded at these levels with sub $3.00 copper. Looking to short these stocks as well as copper.

    I'm looking for copper to pull back to $2.70 into December. Maybe even $2.55 if the black boxes get turned off into end of year and let the liquidity subside some.

    Proabably need Gold and Euro to correct as well to get paid on a short of copper. Basically need the infinite carry trade bid to go away and let fundamentals take over.
  2. Doji7


    why copper don't tank??
  3. Doji7


    This is no sense rally
    4000 tons added to LME stocks last 3 days
  4. silk


    copper has tacked on another 7% in price since my original post. And inventories have still risen every day since. This is amazing. I guess people think that if gold can go up every day, then everything else can too. Doesn't make sense to me.
  5. Suggest it's "the carry trade"... so long as speculators can borrow $USD for 0% (DUMBASS BERNANKE) and invest in virtually ANYTHING other... likely for the "other" to rise. It's all phony-baloney, but can last for longer than you can rationally imagine.

    When the conditions for the carry ends and it needs to be unwound, all will come down... like an avalanche.
  6. Wild, when I was a local in the copper pit (late 90's), copper was trading roughly .70! That reads seventy-cents. A big day was a .02 move, and I mean that was a pretty good day.
  7. Doji7


    This story could explain copper market speculation

    Forward Copper Prices Rising, China Inventory Still High
    November 18th, 2009 ·

    Something strange has been going on with forward dated copper, both the 3 month LME and the Shanghai Futures price for February (and to an extent March) have been rising relative to spot. Open interest contracts have increased markedly last week. At first sight there doesn’t seem any obvious reason why until one reviews the recent news, reported on MetalMiner too, or comments made by China’s central bank regarding the appreciation of the Renminbi and an adjustment if not outright severing of the Renminbi-US Dollar peg. It is probable that Chinese investors are hedging against a possible adjustment in the rate prior to the early spring of next year underlining the significance copper has in the mindset of Chinese market players. And why not when you look at the rise in copper this year, some 116% according to the Financial Times. Copper has rewarded those that have bought early and held the metal. Much of the rise was attributed in the first half of 2009 to the State Reserves Bureau but in reality they acted as no more than a catalyst. Of the 2.6m tons imported so far this year into China, the SRB made up just 235,000 tons. They would have bought more but the price rose too far, too fast and they stopped buying when it got to around $5000 per ton. Interestingly the article quotes Antaike, a state-owned Chinese commodities data provider, as publicly estimating that end users are only buying 10% more metal in 2009 so there is around a million metric tons of excess stocks accumulated in China this year, or about two and a half months of real end demand. Much of this is supported by state bank loans made to companies for legitimate business investment but in the absence of viable capital investment opportunities companies have used it to speculate on rising metal prices.

    In itself this isn’t a significant risk unless for some reason the dollar rallies and the copper price falls, in which case the banks making the loans covering these stockpiles could make margin calls. If that happens positions could be liquidated and a quick fire would have the effect of pushing the price down further. As the price dropped more positions would experience margin calls and so on. There is no way of knowing what the average price of these positions is sitting at but judging by how far the price has risen, the chances are its around $5000/ton+ so not at any imminent risk of being subject to distress liquidation. If demand remains strong, these positions will probably be absorbed into ongoing consumption as 2010 unfolds. For now imports have slowed yet the price has remained firm. Steady as she sails captain let’s hope there are no rocks below the surface.

    –Stuart Burns
    Nickel and Zinc have also been the subject of some stockpiling, Iron ore was also purchased speculatively in the first half 2009 although there is less evidence that is happening now. Copper is the “best” metal for such activity though because the value is comparatively high so storage costs are proportionally low and the market is highly liquid meaning the material can be easily sold when the position is unwound.
    We have heard anecdotal evidence of all kinds of companies getting into physical stockpiling, even as extreme as farmers borrowing on their assets to fund physical hoarding but its only the larger insitutions that would have access to the futures market to play the forwards curves.
  8. 4EXJOE


  9. silk


    Sounds like speculators sitting on 1 million tons of copper over in china. You would think someone would want to hit the sell button soon. There is no demand. Todays housing permits and poor housing starts pretty much guarantees no demand in the U.S. for another 6 months at least.
  10. Doji7


    yesterday Inventory 414,100 TTM + 4,100
    today 420,550 TTM + 6,450
    #10     Nov 19, 2009