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Copper Traders in the World Bracing for Inventory

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Published on : Apr 23, 2015

The copper traders in the world are in a dreaded state. China which is large consumer of copper has withdrawn demand due to slowdown of building boom, and market data for the week elucidates higher volumes consumed for intermediate copper concentrates rather than the finished material which has been the mainstay of global trade.

It is sign of further tough times for copper traders, as inventories pile up financial deals to unwind and demand wanes. This will further put pressure on premiums that have already dropped to the lowest in two years.

As per one copper trader, there is no room margins are tight and everybody is fighting for business. The traders echoed the widespread sentiment that was experienced at the biggest conference of the year at Chile, the CRU Copper Conference.

As per traders’ estimates, another 150,000 tons of copper will likely land at registered warehouses of London Metal Exchange by next month or so. That would take the inventory at LME for MCU to a whopping 500,000 tonnes having risen to the level first time since October 2013, and the inventory almost getting doubled in nine months.

In the first quarter, exchange inventory increased by 300,000 tons much more than what was expected, as cash premium above forward prices was the reason to draw out the excess stock. The structure which is known as ‘backwardation’ is not seen for the first time in nine months. An unfavorable business arbitrage between Shanghai and London has further slowed the pace of copper buying.