Notwithstanding the action on Tuesday, which was prisoner to "dollar down, commodities up" (per HAL9000 programming), there was an interesting blurb overnight on copper via Bloomberg. I was surprised how popular last week's post about a copper crash was [Feb 2, 2010: Trader Who Called 1996 Crash in Copper Says Prepare for Another - "Catastrophe" Awaits] and as the dollar has strengthened, copper had a very bad week. The Bloomberg piece continues on my multi-year belief that commodity prices now have less and less to do with real supply and demand (economics 101) and rely much more on whether China is buying or not buying [May 13, 2009: Commodities - It's China's World: We Just Live in It], along with 'financial innovations' in relatively shallow commodity markets.
Projections call for China to return to 2008 levels of copper purchases after a huge influx of purchases in 2009. A year ago at this time we were talking about the coming stockpiling by China - and copper had a year for the ages. [Mar 23, 2009: FT.com - Chinese Stockpiling Spurs Copper Price Rally] Now we're talking about the exact inverse - a 50%-ish drop in imports. If true, it cannot bode well for copper over the intermediate term.
- Copper imports by China may halve from last year’s record as the government rolls back stimulus spending and curbs credit growth, according to China Minmetals Nonferrous Metals Co., the nation’s largest metals trader.
- Shipments of refined copper may be about 1.5 million metric tons this year, down 53% from 2009, as China bids to prevent the economy from overheating, said Gu Liangmin, general manager of Minmetals’s copper department. That’s in line with 2008’s volumes of 1.46 million tons. Futures more than doubled last year as government stockpiling in China and the country’s $586 billion stimulus package boosted demand for the metal used in autos and construction.
- “Without the liquidity and economic stimulus, we will not see a repeat of the exceptional year in 2009,” Gu said in a phone interview from Beijing. “Demand last year was driven by stockpiling, investment demand and government spending.”
- China shipped in a record 3.18 million tons of refined copper last year, helping to boost stockpiles in the country by more than five times.
- “Imports will moderate and return to pre-stimulus levels,” Lin Yuhui, deputy general manager at Jinhui Futures Co., said from Shenzhen. Lin also forecasts that the country’s copper imports will be about 1.5 million tons this year.
- Copper inventories in warehouses monitored by the Shanghai Futures Exchange stood at 114,302 tons last week, the highest level since April 2004. Unreported stockpiles, including those held by producers and end-users, are “in excess of 1 million tons,” Minmetals’s Gu estimates.
- Three-month delivery copper on the London Metal Exchange traded today at $6,520 a ton compared with $7,375 at the end of last year. The contract surged 140 percent in 2009 as demand revived after the worst global recession since World War II.