John Mauldin, in his newsletter, had recently mentioned that China, in its distaste for the Dollar, has stockpiled monstrous amounts of copper. However, it has warehoused so much of the stuff that there is now a global copper glut. The price is already starting to fall! I got a sell signal on my charts today!
From Bloomberg:
Copper’s 80 percent rally this year may soon end on signs that China has stockpiled more than it can use in new homes, cars and appliances.
Inventories monitored by the London Metal Exchange posted their first back-to-back weekly gains since February, increasing 8.6 percent from an eight-month low. Sumitomo Metal Mining Co., Japan’s second-largest smelter, said Chinese imports are slowing after record purchases boosted domestic supplies, and U.S. copper-scrap exporters report shipments to Asia are dropping.
Prices will also decline because the 4 trillion yuan ($585 billion) of economic stimulus spending by China, the world’s biggest metals user, won’t make up for weak demand elsewhere, said Michael Pento, chief economist at Huntington Beach, California-based Delta Global Advisors, which manages $1.5 billion. The global economy will contract 1.4 percent this year, deeper than forecast in April, and a sustained recovery from the worst recession since World War II may be a year away, the International Monetary Fund said July 8.
“I’m looking for a pullback right now in copper,” said Pento, who correctly forecast in January the price would rise at least 77 percent this year. “Base metals have just gotten overextended as people bet on the China story. Investors should exit this market now as the price comes down to match reality.”
The metal for delivery in three months jumped to $5,646 a metric ton ($2.563 a pound) on July 27 on the LME, the highest price since Oct. 8, and traded at $5,470 a ton today. Copper has rallied more in 2009 than it has in any year since 1987.
On the New York Mercantile Exchange’s Comex division, copper futures climbed to a nine-month high of $2.579 a pound, topping Pento’s January forecast of $2.50 by year-end.
‘Likely to Fall’
Refined copper imports by the Chinese more than doubled to 1.78 million metric tons in the first half and reached a monthly record of 378,943 tons in June, customs data show.
“China’s copper imports are likely to fall in the second half of this year because it bought so much in the first half, the government has stopped buying and demand from end-users may not be as big as people anticipated,” said Zhao Mingwang, manager of futures trading at Zhuji, China-based Zhejiang Honglei Copper Co., which produces about 100,000 tons of wires and rods a year. “The imports were so large it’s hard to fathom where it all went.”
Most of the gains in LME-monitored inventories during the past month reflect the eightfold jump in the volume of material in warehouses in Singapore and South Korea, the closest to China.
