LONDON, Nov 21 Copper’s recent turbo-charged rally has upended the market’s narrative of supply surplus. Too much supply was supposedly the reason why copper, until this month, was the worst performer among the base metals traded on the London Metal Exchange (LME).
But right now the market is struggling to work out where all that extra copper actually is. LME stocks are low and falling. Stocks registered with the Shanghai Futures Exchange (ShFE) are rising but still low.
The shuffle of metal between the two exchanges has blown a smoke-screen around the stocks signals this year but the much-feared wall-of-copper is proving surprisingly elusive. The best bet is that it is still working its way down the supply chain with this year’s surge in mine production yet to be converted into refined metal.
Because at the heart of copper’s supply story has always been the wave of extra material coming from a combination of new mines and expansions, all entering the price cycle at precisely the wrong moment.
Yet even this assumption has been thrown into doubt by a surprise drop in smelter treatment terms for 2017 shipments, implying the copper raw materials picture may be tightening earlier than expected.
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