vrijdag 23 mei 2014

LME copper stock hits multi-year low

The latest numbers on the forward curve for copper show something interesting. Copper went from contango steeply into backwardation again in just a month (see chart below, created by Correlation Economics). This indicates price strength in copper.


And consistent with our correlation between copper backwardation and LME stock levels, the LME stock level went down as well, hitting multi-year lows. We are hitting below the 200000 tonne level, never seen since 2008.

This indicates to me that there is a tight supply of copper. We may have a surplus in copper concentrate, but what is off the radar is the deficit in global refined copper. That deficit stands at approximately 600000 tonne this year. If this trend of backwardation widens in the coming months when LME stock levels hit critical low levels, copper could rise some more in price.

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