IKN

Thy sin’s not accidental

LME warehouse copper

Here’s the chart:

The downdraft in Copper held at LME warehouses continues unabated and stocks are now down to 348KMT. The most recent part of the move is apparently due to cancelled deliveries, which is what happens when a copper producer agrees to send its wares to an LME bonded warehouse but then backs out of the agreement (perfectly legal, don’t worry) before the alloted delivery date. This is usually understood as a copper producer preferring to send the metal directly to the buyer instead of to the middleman waystation…but it ain’t necessarily so, Joe. Producers are also fond of higher prices (duh), so if they think the market will react bullishly to a lack of LME stockpile they might just decide to pile it up in their own backyard and not where the LME counts the metal. That’s just one scenario of many.

But with that said Occam’s Razor states that lower LME stocks = higher copper prices, at least in the short term. And with copper in backwardization (see that little chart from yesterday) there’s little doubt that a short term squeeze is on the metal, no matter if it’s actually being used or not.

Bottom line: I’m still bearish but aware of the bull case. I can’t escape my own AdamSmithian baseline, y’see. Let the hedge funds and Chinese stockpilers have their place in the sun.

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