been hard to read on price direction

Sydney - Wednesday - September 16: (RWE Aust Business News) -
Justin Smirk, senior economist for Westpac said a few weeks ago we noted
an unusual event in the copper market - the price of copper was rising
even though inventories at the metal exchanges were also rising.
From early July, copper rose 28% in price while global
inventories grew 27%.
Since our August update, copper prices have stabilised.
However, inventories continue to grow and are now 11% larger than
mid August.
As such, our scatter plot of price vs. inventories is drifting in
an easterly direction the wrong way compared to a more normal
relationship where prices fall as inventories rise (a south east
movement).
Earlier this year, prices started to rise once inventories peaked
and the market started pricing in a recovery in demand.
This time, copper prices have made significant gains even though
inventories are yet to peak.
There are, however, some signs that the market may be a little
less confident than it was earlier this year.
When the spot price for copper bottomed in February, the longer
dated contracts where 12% higher.
Currently, the longer dated contracts are 9% lower.
The recent dip into backwardation (a downward slope to the
futures curve) has been caused by smaller rise in the longer-dated
contracts relative to the rise in spot suggesting the market is being
cautious.
We should highlight that from 2004 to 2007 the backwardation in
the futures curve was very steep.
But there are two factors we think suggest it should be less so
this time.
The first is growing faith in a Chinese driven “super-cycle”
lifting the outlook for commodity prices.
The second is a reduction in the near-term price squeeze as
supply caught up with demand reducing the pressure on spot prices to draw
forward production and release private inventories.
Market participants will be looking at the various global demand
indicators.
Any sign of the current recovery faltering, or Chinese demand not
being as robust as first thought, copper prices will come under pressure.

As inventories of copper at exchanges continue to grow so too
does the risk of a meaningful correction in price.

Reuters.