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Gold/Mining/Energy : Copper - analysis

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To: tyc:> who wrote (142)	7/5/2000 9:59:04 AM
From: Robert Douglas	Read Replies (1) of 2131

To what extent can LME warehouse stocks be used as a gauge of the world's supply/demand situation ? Well, I'm not in the industry, so there might be something better, but I think that LME stocks are a very good indicator of the supply demand situation. The recent decline in LME stocks is certainly an indication that demand has picked up in relation to supply but I don't know if the present rate of decline can continue much longer. Most reports that I have seen place shortfall in supply for the next few years at between 200 to 300 thousand tons a year. It's possible that the end-user's inventories were too low as they became complacent during this most recent period of low prices and plentiful metal. The metal could have been shifted to here from LME warehouses. This is a typical pattern. No one wants to keep inventories of something that is declining in price, but when prices firm up then there is a rush to build the depleted reserves. So although I like seeing the drop in LME stocks, I don't think it can be taken as a perfect proxy for what is taking place in the world.

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