Tuesday, December 21, 2010

As Copper Hits Record Highs: "China’s bonded-warehouse copper mystery"

Some smart reporting from FT Alphaville:
Copper prices in London soared to record highs on Tuesday as data from China showed the country’s imports had picked up for the first time in three months — just as fears over supply disruptions in the world’s biggest producer, Chile, increased.
As Bloomberg noted, copper for delivery in three months on the London Metal Exchange climbed 1.4 per cent to $9,327 a metric tonne.
Meanwhile, copper for delivery in March climbed as much as 1.3 per cent to $4.2595 a pound:

Despite that interesting surge, the dynamics at play are even more intriguing.

According to analysts cited by Reuters, even though China’s monthly imports of refined copper rose nearly 37 per cent in November, the consumption pick-up to 661,376 tonnes in November versus 549,704 in October was actually driven by supply.

Imports, they said, were still being stored in bonded warehouses, with more refined metal being offered in the Shanghai spot market than ever. The consumption pick-up, therefore, was more of a response to ample and cheap supply in the market.

As Reuters noted, the London/China arbitrage window was after all firmly shut during the period...MORE