Monday, April 1, 2013

Copper inventories swelling

I have discussed copper before and something recently caught my eye which deserves a followup post.  Copper inventories are rising rather dramatically.

Worldwide copper inventories and yearly change

As you can see from the chart above copper inventories are now at highs not seen since nearly 10 years ago.  More importantly the year over year change is quite positive as well.  The above graph is a month old but as we can see from a higher frequency chart total inventories may break 900 thousand tons soon.

Glocal Copper stocks - Source: Reuters
Copper pricing has been week recently as well and sits on a rough trendline going back to mid 2010.

Copper prices week - Source:

Why inventories are rising so quickly could be due to several forces, some of the top of my head are:

Rising production -- New mines coming online.

Declining demand -- A sluggish Europe could be assisting in keeping demand down.

Hidden inventory being brought back onto the markets -- If this is a case of Dark Copper coming back into the official warehouses it would validate some theories regarding base metals being used as financing source in China. posts dated March 31, 2011  and April, 26 2012 provide good roundups of the possibility and mechanics.

Of course only hindsight knows why copper stocks are building right now. We have to wait to find out why.

Disclosure: Short Base Metals

1 comment:

  1. The previous lending restrictions in China forced entrepreneurs to find "alternative" financing solutions - using precious metals or commodities in combination with forex positions to finance new loans. If I recall correctly this may have been something you talked about previously (or I may have seen it on ZH or elsewhere).