Copper supply tightens
Copper Traders have been shifting copper from LME-tracked warehouses to China to take advantage of arbitrage opportunities, boosting the amount held in facilities monitored by the Shanghai Futures Exchange to a record. The movement has also been spurred by traders purchasing metal priced in dollars as a currency hedge amid expectations of a weaker yuan, said Michael Turek, head of base metals at BGC Partners in New York. Stockpiles of LME-monitored copper slumped 3.7% on Thursday, the most since May 2014. Inventories dropped for a 21st day on Friday to the lowest in almost 17 months. The withdrawals have helped boost copper prices by 17% since mid-January. The premium that metal for immediate delivery commands over later contracts has widened this year, a sign that supplies have tightened. While LME stocks have dropped quickly, the build taking place in China has been at least as severe, Macquarie Group Ltd. said in a report e-mailed Thursday. This years rally in iron ore has also boosted optimism that demand in China, the biggest metals user, may be better than previously expected, it said. The total amount of six metals in LME facilities has dropped 26% in the past year to 4.1 million tons. More than 10 million metric tons of aluminum are held in unmonitored locations, according to Macquarie. The bigger picture really is we are awash with aluminum, Caroline Bain, a commodities economist at Capital Economics in London, said by phone. Even though stocks have been falling, the demand isnt there. We have to assume that most of this metal is going off-exchange.