In what can only be described as mindless, wild-crack-up, boom speculation, copper inventories in the three big exchange warehouses have hit extremely high levels, even higher than what was seen in the pre-financial crisis 2008 commodity bubble Numero Uno. Click to enlarge:
All this is happening at the same time that China, the consumer of 40% of the red metal, is seeing a well telegraphed (but largely ignored) slowdown. I have reported on this at length [Chinese Exporters Going Down]. Indeed as reported over a week ago, China copper imports for February dropped 19% compared to last year and were 35% less than January [China Copper Imports Drop Again]. That’s the lowest since November, 2008.
Little wonder that this demand has dropped off, as the normal seasonal export shipping cycle to the West Coast has completely failed to materialize. In addition, mortgage activity in Shanghai in February was reported to be down 63%.
Big Chinese Export Slowdown Underway. Click to enlarge:
The reconstruction story on Japan has gone from the sublime to the ridiculous. One would think that the entire country was razed to the ground to hear all the materials industry bulls on the subject.
In reality the earthquake/tsunami was disruptive and took out certain key facilities (including about 10% of Japan’s power) and caused lesser damage to other facilities, infrastructure, and factories. The manufactured products involved are components, not requiring heavy equipment. This will primarily result in repairs, not country building. It will also negatively impact economic activity and supply chains, not promote them. For instance, in a survey of Chinese importers of electrical and mechanical supplies, 40% indicated the impact to be "huge".
From all accounts the extensive destruction was confined to a coastline located in a more isolated, less densely populated part of the country. The tsunami wrecked a few smaller cities within a couple of miles of the coast.
If there is a radiation issue involving the region around the nuke facilities it is quite unclear how this would result in the extensive use of materials, other than building a large enclosing dead zone fence. As these aerials well illustrate, this is hardly the silly season "global reconstruction boom” being sold to the unwary. Click to enlarge:
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.