What's up with copper supply?Was wondering why Cu was down today, found this:
SHIPPING DELAYS
"It's the same group of smelters threatening to deliver large amounts of metal this time around but the problem is securing enough shipping capacity to move significant volumes to the nearest LME warehouses in either Taiwan or South Korea.
The shipping sector is still experiencing its own turmoil with high freight rates and log-jammed ports, including in China.
One of the reasons LME stocks fell so low in the first place is that copper has not been immune to the transportation snarl up - Fastmarkets, for example, reports multi-month back-ups in shipments of the metal from Africa.
The LME time-spread implosion suggests shock-and-awe deliveries over the coming days but it remains to be seen if this is logistically feasible.
Just one week's delay in global copper shipments is equivalent to around 600,000 tonnes of metal, according to analysts at Citi. ("Metals Weekly", Oct. 26, 2021)
That may help explain the grab for LME-registered copper in the weeks running up to the October date.
RESTOCK OR STOCK-OUT?
If Chinese exports do accelerate over the coming weeks, they will help plug some of the supply gaps that have opened up elsewhere and, if delivered to the LME, will provide a much-needed reboot.
But the global rebalancing will be no more than stocks relocation and may well leave China itself short of metal if demand surprises on the upside. It's worth noting that Shanghai Futures Exchange stocks are also currently low at 38,037 tonnes last Friday.
Goldman Sachs, which remains a copper super-bull, argues that global copper inventory is at record lows on a consumption-weighted basis and could fall further, putting the metal on the path to scarcity pricing.
The bank is looking for the price to "balance at $12,000 per tonne into next year" with "the potential for a price spike to even higher levels". ("Copper: The inventory endgame", Nov. 14, 2021)
That's an increasingly minority view among analysts, who are more concerned about signs of a slowing Chinese economy, but the possibility of a stock-out is still keeping would-be short-sellers at bay.
Fund managers have scaled back their long exposure on the CME copper contract since the October price spurt but have shown no inclination to express a bearish view. The outright LME copper price remains finely poised at $9,500 per tonne.
Bears and bulls are waiting to see what happens next to LME stock levels, which means that right now everyone's looking at China.”
https://www.reuters.com/business/energy/all-eyes-china-lme-copper-spreads-collapse-andy-home-2021-11-17/
b.