This copper selloff is so bad, I actually have to chunkle. Now note the logic of this rout. First a "mystery hoard" (a "whopping" 7500 MT, just rearranging deck chairs on the Titanic) appears on the scene in Shanghai along with empty "threats" to raise interest rates, or "curtail" credit. What a farce as China engages in serious and increasingly desperate MoP operations. I'm sure this is orchestrated to manipulate, I mean attack oil prices too. Meanwhile here's the reality of the situation. Shanghai currently has 28,705 MT on hand, which translates as virtually gone, regardless of whether the Chinese economy is slowing down. Comex has 41,408 MT on hand, which can hardly be called enough inventory to back any paper obligations that are out there. LME is now down to only 88,575 MT. Add it all up and it's deep doo doo.
Copper Falls Most in 4 Months in London as Inventories Rise
Oct. 13 (Bloomberg) -- Copper prices fell the most in four months in London as official inventories in China, the world's biggest user, climbed from an all-time low and the central bank indicated borrowing costs may rise.
Stockpiles in Shanghai Futures Exchange warehouses increased 29 percent this week to 28,705 metric tons, the most in six weeks, after prices reached 15-year highs. Copper has surged 30 percent this year as inventories tracked by exchanges in London, New York and Shanghai plunged 80 percent.
``Buyers are not willing to enter the market now given signs that tight supply of the metal has been somewhat eased,'' Pan Haisheng, a metal analyst at China Aviation Futures Co. in Shanghai. ``Threats of higher currency and interest rates still shadow the market.''
Copper for delivery in three months fell $124, or 4 percent, to $2,970 a ton at 8:53 a.m. on the London Metal Exchange, the biggest drop since June 9. It closed at a 15-year high of $3,145 on Oct. 8.
Prices may fall as low as $2,895, said Tetsu Emori, strategist at Tokyo-based Mitsui Bussan Futures Ltd. ``The market is looking overbought,'' he said.
Other metals followed copper. Aluminum fell $63 to $1,737, tin slumped $225 to $8,950 and zinc lost $22 to $1,134. Lead fell $30 to $935. Nickel plunged $1,500, or 9.5 percent, to $14,350, the biggest drop since January.
China Growth
China should use more market-based measures to achieve the government's goal of gradual economic slowdown, the central bank said, a sign it might consider boosting interest rates for the first time in nine years.
Higher interest rates might slow China's economic growth and crimp demand for metals. China uses about 30 percent of its copper in electrical cables for the country's expanding power grid.
Chinese copper demand fell 21 percent in July as Premier Wen Jiabao took steps to slow economic growth to 7 percent from 9.7 percent in the first half. Economists including Goldman Sachs Group Inc.'s Liang Hong say China should raise interest rates and scrap the yuan's peg to the U.S. dollar to help cool the economy.
China has kept the value of the yuan fixed at about 8.3 to the dollar since 1995. The U.S. and other countries say that undervalues the currency, holding down the cost of China's exports and giving the country a trade advantage over Western manufacturers. |
