The downturn in the Chinese property sector should actually be putting downward pressure on the copper price, as the red metal is used in large quantities in the construction industry.In addition, China's copper stocks are also significantly higher than normal at this time of year:The analysts looking at this data are therefore bearish in the short term. Western and ‘rational’ analysts in particular seem to be struggling with a possible paradigm shift.
Given the current price and inventory levels, it would only be logical to expect massive copper exports from China.... and a falling CU price but none of this is happening.
However, this previously prevailing view now seems to be coming up against a changed reality: China is building up reserves of raw materials.What interest could China have in building up such extensive copper reserves?By hoarding copper, the country is removing physical stocks from the market.This makes finding new sources of copper a challenge, especially for Western countries. Geopolitical issues also seem to play a role here. I have often mentioned - this is a form of war against the West and against the USD.
The decoupling of the futures market and the reality on the physical market could force the industry to enter into direct off-market agreements with producers. A new environment appears to be emerging for the procurement of copper. This means that, in addition to all the other problems, a new problem is emerging - namely that the buyers (e.g. the industry) are trying to gain direct control over production - and ultimately over the ‘deposits’. This will certainly lead to ‘money’ flowing - also into exploration. Perhaps the few peanuts that South32 paid for the earn-in with HMX should be seen in this context......
Is copper about to become a ‘precious’ metal?
I think that the price of CU will overshoot the previous highs in the next two months and resume its journey towards USD/lb 6.00.
HMX Price at posting:
3.9¢ Sentiment: Buy Disclosure: Held
