David Hargreaves on Exchange Traded Metals, week 11 2014

Buzz of the week was a sharp fall in the LME copper price, 6.3% to $6490/t and a full 17% below its closing 2012 price.

The others, too, fell on the week, but only marginally. Copper is now at a four-year low and inventories are piling up in Chinese warehouses. We fear for the Chinese financial system and the fact that the metal is often used as collateral in unrelated financial transactions. As we show, LME warehouse stocks stand at c.250,000t or only 5 days of world annual demand. Now CRU estimates that Chinese bonded warehouses alone hold 770,000t, nudging towards the historical high of 825,000 in 2012. The movement last week was largely blamed not on the user trade, but Chinese speculators. They are rather fond of a gamble. We note in the leader those shares most affected.

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About David Hargreaves

David Hargreaves

David Hargreaves is a mining engineer with over forty years of senior experience in the industry. After qualifying in coal mining he worked in the iron ore mines of Quebec and Northwest Ontario before diversifying into other bulk minerals including bauxite. He was Head of Research for stockbrokers James Capel in London from 1974 to 1977 and voted Mining Analyst of the year on three successive occasions.

Since forming his own metals broking and research company in 1977, he has successfully promoted and been a director of several public companies. He currently writes “The Week in Mining”, an incisive review of world mining events, for stockbrokers WH Ireland. David’s research pays particular attention to steel via the iron ore and coal supply industries. He is a Chartered Mining Engineer, Fellow of the Geological Society and the Institute of Mining, Minerals and Materials, and a Member of the Royal Institution. His textbook, “The World Index of Resources and Population” accurately predicted the exponential rise in demand for steel industry products.