I have a friend who used to trade Russian cathodes, he may have some ideas for us.
From FT Alphaville:
More than 2.8m tonnes of hidden copper stocks
The debate over how much copper is being stored ‘off market’ in private inventories — not part of the LME inventory system — has been going on for a while.
The general position taken by investment bank analysts is that supply is tight. There’s not enough inventory to go round and whatever private inventories exist are hardly big enough to offset rising, mega demand from China.
Others like Simon Hunt of Simon Hunt Strategic Services, David Threlkeld, president of metal strategist group Resolved Inc and Steven Spencer, chief executive of Traderight, a commodity trading advisory — notably all independent — claim the opposite.
They say anecdotal evidence suggests there’s been a hugely worrying rise in off-market inventory. So much so that a sudden and violent liquidation could pose a major threat to market fundamentals.
The problem for them is that it’s hard to get cold hard data on the scale of the problem.
But, in his latest note, Simon Hunt says data is finally coming to light. And it comes from a less than obvious source: SEC filings from yet to be approved copper ETFs.
As Hunt notes:
JP Morgan and Black Rock have been promoting their physical copper ETFs to potential investors on the basis that the copper market is extremely tight, that there are no hidden stocks and that therefore prices will go much higher. Both groups have made frequent filings to the SEC to obtain approval for their listings. Now comes the bombshell for the bulls. In its latest filings, JP Morgan stated that in addition to the reported circa 568kt in exchange stocks in 2010, there was a further 2.53 million tonnes in the physical market. Black Rock stated that the amount of copper in exchange approved warehouses at the end of 2010 was roughly one-fifth of total global refined copper inventories meaning that the total outside the exchange warehousing system was more than 2.8 million tonnes.These crucially important copper stock factoids (which came in the form of amendments to the institutions’ original filings) were actually dug up by Dow Jones reporter Andrea Hotter....MORE