Chart of the day is.....

...LME copper warehouse inventories, five year period.


Today's chart because a certain reader is surely all happy it went under 400k this week. Yeah P, I mean you :-)

Copper inventories

In the last few days, up days have been cut with down over at the LME inventory, which is a typical rollover pattern for stocks.

Feb 14th is Chinese New Year, tigers will be burning bright (in the forests of the night) for a week or so, then the drawdown will start in earnest. May you live in interesting times and may you do your own DD, dude.

Chart of the day is.........

.....LME copper warehouse inventories:

Hateful, aren't I? All you want to do is to ignore things like "reality" and keep enjoying this bull run that WE ALL KNOW WILL NEVER EVER END and here's me prodding at your ribs with the pointed stick of Cu warehouse numbers again.

Elephant? Meet room.

Canary? Meet coalmine.

Charts of the day are....

...those boring copper elephant-in-room fundy thingies again. LME inventories are at a six month high and show no signs of stopping.

Here's the context

And here's the price chart

The only way that copper can perform the way it's been performing is as a hedge against the dollar. And copper isn't an asset class, folks! Never has been, never will be (unless this time is different, of course) and so the equal/opposite type reaction you see from copper can only be temporary. Put simply copper isn't gold, so anyone that puts the word "copper" next to the phrase "safe haven" in the same sentence should immediately be dropped from your list of advisors. Cos sooner or later that person is heading for a fall...happens every time.

UPDATE: Thursday's LME inventory number is just out, up 4,800MT to 402,125MT. But don't worry, it's just fundies. Party on Garth.

Copper news

LME Week is here again (my how time flies) and here, from some RBS flunkey, is the best quote from the copper suits I've seen so far in their week of spotlight (in bold).

"The world economy is by no means out of the woods, but in our view the theme during LME Week will be the prospect of demand recovery in 2010," Royal Bank of Scotland said in a note.

"Yet we would still urge producers to be very cautious about embarking on price induced as opposed to demand induced reactivation."

This can be put into real English thusly: "There's an awful lot of idle supply waiting to jump back in, but if it does copper will sink so don't screw the roost and start ramping back up, pleeeeeeease.... cos I want my bonus".

Demand, eh? Supply, he said? My, the oldskool words are back in fashion! So how is that demand coming along (inquiring minds etc)? According to some flowery named dude over at Nexans:

"If you look at the physical market I see pretty depressed prices over the coming months. Prices are likely to fall this year and part of next year. It really depends on when growth will pick up."

The same note then goes on to point out an inconvenient truth or two, such as:

At the end of May, 21% of all copper in LME warehouses was booked for delivery. Today, the proportion is 2.6%.

With LME copper inventories now at 347,375MT and climbing, it really doesn't look very good from the underlying demand.


As the JP Morgan flunkey puts it (quoted in the FT):

Michael Jansen, of JPMorgan, said that he expected increases in metals stocks would be a "significant hurdle" to further price gains.

DYODD, dude.

Am I still allowed to be bearish on copper?

Ok, so Olympic Dam looks like taking 50KMT off the market in the near future, but where does it rate as an influence compared to end user demand, or the dollar?

Here's the LME inventory chart (6 month):


Here's the same period price chart

Here's the spooky Reuters report that tells you about the nerves on the demand side

Here's the USD chart (hey look, it held 76)

Copper

Here's the latest LME inventory number (which shot up over 340,000MT late last week):

Here's the five year inventory:
Here's the spot price over the same period.


Is the rise in inventories and the reversal of copper prices related?

Is the Pope Catholic?

Do bears tend to defecate in woodland areas?

Chart of the day is.........

....LME inventories of copper...just for a change, eh?

Here's the five year chart for context.

It comes with this quote from Reuters this morning:

"We're bound to recover at some point but for the next six to 12 months anything can happen. Demand isn't great and there is excess material out there," said an LME-based trader.

Translation: "WTFDIK? But hey, buy anyway..what could possibly go wrong, suckaz?

Copper Inventories

Yeah I know, it's like one of those itches you can't stop scratching. Here's the latest LME inventory (Monday 14th Sept number, out a few minutes ago).....

......and 300,000 is getting left behind fast.

"Err.....like thanks Doctor.....it was a great party dude.....but like I gotta run now, y'know.....don't wanna stay too long....."

Copper inventories

Here's the 30 day chart...
...here's the long range chart for context....

...and rather than repeat myself til blue in face, here's someone talking to Reuters in the excerpt below that does the job for me today. But it's all scaremongering right? Things never go down in the market...they always go up...right?

"A rise of nearly 25 percent in copper stocks since early
July has been troubling investors, who are wary of a correction
in the price, which rose to an 11-month high at the end of
August. [ID:nL8550447]

 "When you break down the rises, most of them come from
warehouses in Asia. There's no demand and Chinese are not buying
and the open interest has completely tumbled at the end of
August," said Andrey Kryuchenkov, analyst at VTB Capital.

 In a sign demand remains sluggish, the premium for copper
ready for use is now around $32.50 a tonne versus the usual
premium of $80-$100, said a trader in Shanghai who expects
demand to pick up from November for the end-of-year surge.

LME copper inventories about to break through 300,000MT

Here's the chart as stands today, with the latest LME number hot off the press:

Add to this the first inventory climb in Shanghai for nine days (up 1.7% to 19,656MT) and the rise over at COMEX, up 228 short tons to 53,209 tons. For sure, these smaller warehouses aren't as important as big daddy LME but the trend is clear in all places, this despite lower than expected recent copper production in the world's two biggest export countries, Chile and Peru.

DYODD, dude.

UPDATE: Nervous copper longs send anonymous messages to Otto, hiding their fear and loathing of his superior economics skills behind mockery.

Copper levels up a bit lately.. STOP PRESS! LOL Otto, come on.. it was at 550,000 tonnes this February and now it is at 300,000.. it's a natural swing. I expect the spot to retrace to around 2.40-2.50 before another run up. Didn't you say it was ready for a pullback around 2-2.20? That was over 30% ago. We know you are bearish on copper but you were plain wrong. Let it go.

Chart of the day is...

...LME warehouse copper, now over 294,000MT

Just keeps on creeping up, dudettes and dudes.

UPDATE: Bloomberg wins the "Headline of the Day" award with this one:

Copper Stockpiled by China’s Pig Farmers May Be Sold (Update2)

x

Those LME warehouse copper stocks again

The mini-trend continues, as six of the last seven trading days have now added stocks to the LME warehouses.

That 14,825MT added to the warehouses, folks. Now it's important to keep this still relatively small move in context, so here's the five year chart to keep our heads screwed on and understand the difference between a small move and a game-changer such as the one we saw last year....

...but there's little doubt now that the trend of ever-downwards movement we've seen in 2009 regarding stocks is now broken. And by way of a wrap-up, here's a quick look at LME stocks of the other major traded base metals via their six month charts:

Zinc

Lead

Nickel

Alu

A copper warehouse thought

Now it might not be much of a move so far in absolute terms...

...but copper back to 266,425MT in LME warehouses hasn't been seen since June 8th...when copper closed at U$2.14/lb. Stocks have also moved up four days out of the last five. DYODD, dude.

LME warehouse copper

Here's the chart:

The downdraft in Copper held at LME warehouses continues unabated and stocks are now down to 348KMT. The most recent part of the move is apparently due to cancelled deliveries, which is what happens when a copper producer agrees to send its wares to an LME bonded warehouse but then backs out of the agreement (perfectly legal, don't worry) before the alloted delivery date. This is usually understood as a copper producer preferring to send the metal directly to the buyer instead of to the middleman waystation...but it ain't necessarily so, Joe. Producers are also fond of higher prices (duh), so if they think the market will react bullishly to a lack of LME stockpile they might just decide to pile it up in their own backyard and not where the LME counts the metal. That's just one scenario of many.

But with that said Occam's Razor states that lower LME stocks = higher copper prices, at least in the short term. And with copper in backwardization (see that little chart from yesterday) there's little doubt that a short term squeeze is on the metal, no matter if it's actually being used or not.

Bottom line: I'm still bearish but aware of the bull case. I can't escape my own AdamSmithian baseline, y'see. Let the hedge funds and Chinese stockpilers have their place in the sun.

LME warehouse copper

There's a lot of talk about this chart crossing my desk today:

For sure the 100,000MT lopped in copper stored at LME warehouses in just the last couple weeks is ostensibly bullish. No denying that, but boring old fundy-headed Otto is yet to be convinced there's any demand driver here, sorry.

One clear thing is that China is the driver of this copper take-up. There's little debate on that score. However we saw China restock iron ore over the new year period, now we see iron ore piled up on the docks of that nation and end user demand clearly wasn't the driving force. So why should copper be any different here? This copper move has all the hallmarks of Chinese restocking, as the move is fast and against the grain of world macroeconomics. Another rebuttal worth mentioning to the auto-copper bulls is that warehouse stocks that leave one warehouse (eg in Europe) and are transported to another (eg Shanghai) are subtracted from the warehouse lists while in transit. That might also be a factor in play here.

If the stocks are still dropping hard in, let's say, four weeks time I'll review my bearish outlook on copper, but there's no way I'm chasing a speculative sentiment fuelled by Hope™ in the middle of this bear market. Because that's where we are, like it or not. You won't get any fairydust sprinkled in your eyes at this blog, so if you want the Kool-Aid go watch CNBC.

DYODD

copper thoughts

I've been musing on these two longview copper charts over the weekend. The first one is the 10 year copper price chart (in U$ per MT), the second one is the 10 year LME warehouse stocks chart:

It's boring being a copper bear (in the short term) and watching the price move from $1.75/lb to $1.95/lb in quicktime. So when markets go against my forecasts, I'm always interested in finding out where my mistakes were made.

My basic in-a-nutshell bear call when the price stood at $1.75/lb or so was "copper won't go up because the price move so far has been monetary in nature and not driven by demand." I can still happily stick with that call, even though China imported a large amount of copper in February. This is because China is clearly stockpiling the metal and it's not satisfying final end-user demand.

However, it's clearly not the whole story. My best guess is that large funds have moved back into copper and are buying on speculation. That strikes me as my own bad excuse for calling the move badly, though....it's so darned easy to "blame the hedgies/PTB/WallSt crooks" etc for any market move that goes against you, isn't it?

Whatever it is, although I'm not comfortable with my mistake I have to stick by my call for the time being as fundamental analysis (my baseline) cannot see any reason for higher copper prices going forward. But be clear, that's more my personal analytical weakness showing than any particular table-banging. Any comments either left below or via mail from people with a view on copper very appreciated.

DYODD

UPDATE: Heather Walsh is one of the better reporters at Bloomie. She filed a report from the CRU conference today that goes under the title "Freeport Says Rally Unlikely To Spark Investment Jump". The contents from no lesser name than FCX CEO Adkerson back up my own position.

UPDATE 2: Tyler Durden at Zero Hedge throws another dos centavos into the debate. I agree here, too. What is it about Sundays and musings on copper, anyway?

Charts of the day are...........

......five year LME copper warehouse stocks and five year copper spot price.


They go very well with this report from Reuters:

 SINGAPORE, Nov 21 (Reuters) - The world refined copper
market saw a surplus of 74,000 tonnes between January and
August this year, versus a surplus of 22,000 tonnes in the
year-ago period, the International Copper Study Group (ICSG)
said in its latest monthly bulletin.

 The Lisbon-based ICSG said world refined copper output in
January to August was 12,221 million tonnes, while consumption
reached 12,147 million tonnes. World refined copper consumption
and supply trends, 2007-2008, in thousands of tonnes:

                              Jan-July 08   Jan-July 07
World mine production             10,061        10,161
World mine capacity               12,187        11,838
Mine capacity utilization (pct)     82.6          85.8
Primary refined production        10,411        10,093
Secondary refined production       1,810         1,784
Refined production                12,221        11,877
(secondary+primary)
World refinery capacity           14,893        14,262
Refinery capacity utilization (pct) 82.1          83.3
World refined consumption (1)     12,147        11,854
Refined stocks (end of period)     1,293         1,223
Period stock change                 -129            96
Refined surplus/deficit (2)           74            22
Refined surplus/deficit              206           149
(seasonally adjusted) (3)

 (1) = Based on EU apparent usage.

 (2) = Surplus or deficit is calculated using total refined
production minus refined consumption.

 (3) = Surplus or deficit is calculated using seasonally
adjusted refined production minus seasonally adjusted refined
usage.
(Reporting by Nick Trevethan; Editing by Ben Tan)