Posted on 10/20/2021 11:11:35 AM PDT by Oatka
The London Metal Exchange took action to calm turmoil in the copper market late on Tuesday by introducing temporary limits on some prices, after a plunge in stocks of the metal in its warehouses disrupted trading.
The LME said it would adjust its rules requiring large holders of the metal to lend it back to the exchange. It also said it would bring in a limit on backwardation — a scenario whereby spot contracts trade at a premium to futures contracts, indicating that the market is undersupplied.
Robust demand and rising copper prices pushed inventories of copper on the LME to their lowest level since 1974 this month. Stocks stand at 15,225 tonnes, compared with more than 200,000 tonnes as recently as September. That in turn has pushed spot prices to record highs versus future prices of more than $1,000 a tonne this week.
“We see this as a shot across the bow of trading firms in copper, and is likely to mean that the extreme cash price level seen yesterday is unlikely to be repeated,” Colin Hamilton, an analyst at BMO Capital Markets, said.
Copper prices have risen 12 per cent over the past month and are trading close to their 10-year high of $10,748 a tonne reached in May, as demand remains strong in China, the world’s largest consumer.
Unlike most futures exchanges, the LME’s contracts are based on physical metal that sits in its network of warehouses, which stretch from Rotterdam to Malaysia.
But large requests to withdraw metal over the past month have left extremely low levels of copper stocks on the exchange, which threatens the LME’s connection to the physical market. This week backwardation on the copper contract reached $1,104 a tonne, a record high.
Commodity trader Trafigura has been behind the requests to withdraw the metal, Bloomberg reported on Monday. Trafigura said the metal was for its customers.
“In a very tight copper market with strong demand outstripping available supply, Trafigura has drawn down inventory to deliver it to end users, primarily in major consumption areas in Asia and Europe,” it said. “This is during a period of heightened risk of supply disruptions and bottlenecks in shipping.”
The LME said on Tuesday it would also allow those with short positions in copper to delay delivery of the metal to settle their positions.
All of the changes would come into effect immediately and were designed to be temporary, it said. The exchange is owned by Hong Kong Exchanges and Clearing.
“These changes are intended to ensure market orderliness and continued liquidity, and the exchange believes they represent a balanced approach in respect of all market participants,” the LME said.
Copper was last trading at $10,026 a tonne on Wednesday.
Key sentence and word.
Unlike copper, the gold and silver markets are manipulated/suppressed by selling contracts with no metal behind them. So every time gold or silver shoot up, they short the market with phantom contracts. When they are occasionally caught, they invoke the fine print, which says, in effect, "If we can't deliver, we'll pay you in cash."
That's why they can short a years production in 15 minutes in a "tamp down".
When the rulers are in trouble, change your shorts ..................
Headquartered in Hong Kong. Now under control of the CCP.
Are we insane in the West!!!.
London should be setting up it's own Metal Exchange, NOT owned by the CCP. Should have been done the day before China took control of Hong Kong.
Golly. Maybe this game is rigged.
What does this do to the Green fanatics? Seems hard to go to all electric if you don’t have copper.
Copper wire is used in power generation, power transmission, power distribution, telecommunications, electronics circuitry, and countless types of electrical equipment. Copper and its alloys are also used to make electrical contacts.
Take that and the European gas shortages we might be seeing the people realize the Green energy boondoggle is a pretty concept. But once it steals all of your green it isn’t such a good idea.
I noticed premiums for silver and gold seem pretty high.
One of my kids called and said he wanted some gold last week cause he thinks it is going to go up ?
I told him the 2 important things were the provenance and premium.
he ended up getting a Canadian maple for spot +45
This why I invested in copper stocks this summer.
My wife wanted me to sell my copper hoard earlier this summer. I told her I was too lazy to separate it all and load it into a trailer. Maybe next year.
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