Base Metals

The world has been expecting a copper surplus so far this year, but the Financial Post reported today that recent data suggests the world could be on track for a supply squeeze instead.

The world has been expecting a copper surplus so far this year, but the Financial Post reported today that recent data suggests the world could be on track for a supply squeeze instead. According to the Post, the London Metal Exchange released data this week suggesting that copper stocks in its warehouses have dropped to their lowest level since 2008. The news outlet quoted CIBC world market analyst Tom Meyer as saying a supply shortage could result in rapid rises in price.

As quoted in the publication:

The reason the copper market hasn’t moved much on the news – copper prices have remained consistent around US$3.10 a pound since the start of May – is because Chinese warehouses continue to hold a large amount of the metal. With worries that China’s economy is set to cool in the coming years, some of that copper is expected to find its way back to the London Metal Exchange in the form of arbitrage. Mr. Barnes points out, however, that even China’s copper supply is now shrinking. Warehouse stocks peaked at just over 800,000 tonnes in March and recent estimates peg those stocks at around 700,000 tonnes.

TD Securities analyst, Greg Barnes, told the Financial Post:

With copper concentrate exports from Indonesia still in limbo, Chinese copper demand apparently quite healthy, and reports that China’s State Reserve Bureau purchased 200,000 tonnes of copper in recent months, the much discussed 200,000-tonne 2014 surplus may have just disappeared.

Click here to read the full Financial Post article.

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