World Has Less Than 5 Days Worth Of #Copper Inventories @SRSroccoReport

The World Has Less Than 5 Days Worth Of Copper Inventories

According to the financial media, the global economy is supposedly rolling over causing a glut of inventories producing a deflation in the prices of many commodities.  If this is the case… someone should tell that to King of base metals… Copper.

Something doesn’t seem to be making sense in the copper market as the price continues to decline, so are the level of global copper inventories.  You would think the opposite would be the case, but we must remember in the new Financial Paradigm — Paper assets such as Derivatives, Stocks and Bonds are KING, while Gold-Silver and commodities are GARBAGE.  Which is why (according to their mentality), financial assets are what we should EAT, while gold-silver and commodities are what we flush down the toilet once we are done digesting and consuming them (put another way–CRAP).

If we look at the chart below, we can see a very interesting trend taking place in global copper inventories.  Not only are we are near record lows, we are down to less than five days worth of copper inventories:



(Data from the Chilean Copper Commission website Weekly Updates)

In August 2013, the world held 777,697 metric tons (mt) of total global copper inventories–a 13.5 day supply.  During that time, the price of copper was trading in the $3.30-$3.40 range.  If we move over toward the middle of the chart, by March 2014, the global copper stocks declined to 477,014 mt (8.3 day supply), while the price of copper traded in the $3.00 range.

So, after a near 40% decline in world copper inventories, the price of copper fell 10%.  Interestingly, this is the same the price of silver fell from $25 (Aug 2013) to $20 in March 2014.

Now, if we look at the current data, shown on the right side of the chart, total global copper inventories are now at 263,027 mt at an impressive 4.6 day supply (sarcasm).  And of course, the price of copper fell from a high of nearly $3.30 in June, to around 3 bucks today.

Let’s compare copper inventories at the end of September, going back to 2009.

Global Copper Inventories

SEP 2009 = 490,773 mt

SEP 2010 = 553,737 mt

SEP 2011 = 658,851 mt

SEP 2012 = 427,733 mt

SEP 2013 = 717,232 mt

SEP 2014 = 263,027 mt

Here we can see that end of September copper inventories in 2014 are the lowest in six years…. and at a 4.6 day supply.

Just maybe the copper traders know that inventories are going to header higher by the end of the year if the global economy continues to shrink.  However, a 4.6 day supply of copper doesn’t seem like the demand for the king base metal is really falling all that much… or am I missing something here.

Lastly, there is speculation that the Chinese may be buying and hoarding copper that isn’t recorded in the “Official Inventories.”  I say… so what.

If I were Asian or Chinese, I would rather spend $1.8 billion to purchase the rest of the 263,000 mt of global copper inventories than spend another lousy RED CENT on U.S. Treasuries that will become worthless at some point in the future.

NEW UPDATE 10/18/14:

After reading some of the comments below the article, I did additional research that might help answer some of the questions raised.  However, the more I looked into to the global copper market, the more bizarre it became.

While it’s true that China recently had a probe into its Copper Financial Deals (now gone bad), this became public in 2013 and was addressed early this year.  If it is true that China has all this extra copper in inventory… then why did Chinese Copper imports increase 18.7% year-over-year in the first seven months of 2014???  (source of data from this Reuters article).

Again, if we knew that the Copper Financing Deals were coming apart back in May of last year (Zerohedge: The Bronze Swan Arrives:  The End of China’s Copper Financing), wouldn’t this copper market imbalance be worked through by now?  I mean, its been nearly a year and a half.  By the way, thanks reader houstskool for posting that link in the comment section.

I went back and looked at the data from the Chilean Copper Commission and found some interesting trends.  From Jan-May 2014, global copper production increased 5.6% y-o-y, from 7.28 million metric tons in 2013, to 7.7 million metric tons in 2014.  So, we have an INCREASE IN COPPER PRODUCTION.

Now, from Jan-Apr 2014, the world consumed -2.3% less copper, from 5.4 million metric tons in 2013, to 5.3 million metric tons in 2014… a DECREASE IN COPPER CONSUMPTION.  This isn’t much of a decline, but you would think for the first four months of the year, we would have seen a build in global copper inventories… due to an increase in production and a decline in consumption.  However, if we look at the chart above, global copper inventories actually DECLINED IN A BIG WAY in April, 2014.

Global copper inventories fell from 477,014 mt in March, to 355,075 mt in April.  This was a drop of 25% from a 8.3 day supply, down to a 6.2 day supply.

So, here’s the question.  Why would global copper inventories be falling if global production is increasing, demand falling and China with a supposed GLUT of copper inventories to work through?  Does that make any sense whatsoever?

In one of the comments below, a reader put a link to a BNN interview with a copper analyst about the global copper market, which you can watch at the link HERE.  Basically, he goes on to say that they look at all the different Chinese warehouses and state there is a 250,000 mt global surplus of copper.  If that is the case… then WHY IN THE HELL aren’t global copper inventories RISING instead of FALLING over the past year???

You see, something just doesn’t make sense when we look at all the data.  Again, why did Chinese copper imports increase 18.7% Jan-Jul if they had all this surplus copper they could work through???

In conclusion… all I can say is SOMETHING FISHY THIS WAY BLOWS in the Global Copper Market.

MUST READ: The World Has Less Than 5 Days Worth Of Copper Inventories : SRSrocco Report

#Exploration for nonferrous #metals down 25% SNL.com @Mineweb

Spending drops to $11bn, close to 10 year low. 

As usual, companies "are sacrificing long-term project pipelines in favour of consolidation and maximising returns.” 

Exploration for nonferrous metals down 25% - SNL

BASE METALS

Global exploration for nonferrous metals has fallen sharply again this year – by 25%, according to data collected by SNL.

Author: Lawrence Williams
Posted: Wednesday , 22 Oct 2014 LONDON (Mineweb) -

The mining cycle downturn is in full swing now, just preparing the ground for big price increases when the cycle turns given that current fall-offs in capital spending and exploration are bound to result in serious metals supply shortages, and correspondingly much higher prices when these shortages develop. Sure, there may be a global recession but this tends to mean slower, not negative, growth rates for the most part. Given that mining is an industry dependent on replacing ever-depleting assets as orebodies are worked out and grades decline then these fall-offs in asset replacement expenditures mean serious supply problems down the road.

The graph below from acquisitive research giant SNL whose Metals & Mining division has, in recent years, absorbed both Canada’s Metals Economics Group and Australia’s Intierra (and with the latter Sweden’s Raw Materials Group) gives a pretty clear picture as to what has been happening in the key nonferrous metals exploration sector. After peaking in 2012, exploration expenditures have been declining rapidly and look to be heading down possibly to a ten year low point should the trend continue - and with no succour seen ahead for the junior exploration sector which, in the past, has provided up to 50% or more of the global exploration spend, then the sharp fall seems likely to continue.



In data compiled for SNL’s forthcoming "Corporate Exploration Strategies" study, the group estimates the worldwide total budget for nonferrous metals exploration as having dropped to US$11.36 billion in the current year from $15.19 billion in 2013 — a 25% decrease.  And 2013 had seen an even bigger percentage fall from the record 2012 level. The SNL nonferrous exploration category refers to expenditures related to precious and base metals, diamonds, uranium and some industrial minerals; it specifically excludes iron ore, aluminium and coal.

SNL notes that calls for mining companies to improve profit margins in the face of rising costs and falling grades has led to the industry’s major miners divesting noncore assets and cutting back on capital project and exploration spending.  This has led to a 25% drop in the majors' exploration budget total alone this year. Meanwhile the junior sector has been faring even worse as exploration focused companies battle to stay afloat in the light of rock bottom share prices and, as a group, have been reining in spending in order to conserve funds. SNL puts the fall-off in junior total exploration spending as being 29% year over year in 2014 after falling 39% in 2013, dropping their share of the overall budget total to 32% from a high of 55% in 2007.

And for operating miners in particular it is noticeable that the pattern of exploration has been altering with a concentration on ‘mine site’ exploration following the old adage that the best place to look for new mineral deposits is adjacent to existing ones. Thus brownfield expenditure has been far more prevalent in the exploration mix as this is seen as a less costly way of replacing and adding reserves.  But it does tend to preclude the finding of additional mega deposits which the industry needs to maintain output into the future.

Gold has always tended to be the most significant nonferrous metal as far as exploration is concerned and there are always far more gold exploration juniors than base metals ones. But three years of declining gold prices have taken their toll and the proportion of gold exploration expenditure, while still the largest sector, has declined by 31% year on year to 43% while the collective share of base metals in the mix has actually seen a 2% increase although total base metals expenditure has fallen overall by around  $1 billion.

SNL concludes a release on the latest findings with the comment, “This reduced focus on early stage and generative work has led to concern that many companies, and perhaps the industry in general, are sacrificing long-term project pipelines in favour of consolidation and maximising returns.” But this has always been the case with mining accounting for the industry’s ever repeating cyclical profit pattern.

To contact SNL for more information click on www.snl.com 

Exploration for nonferrous metals down 25% - SNL - BASE METALS - Mineweb.com Mineweb



The MasterMetals Blog

@MasterMetals

#GOLD - Investors liquidation responsible for decline in gold price below US$ 1,200 per ounce in September

Swiss trade data show gold exports hit a seven-month high in September and that the flow to Eastern from Western nations continues, says UBS. Swiss exports were 172.6 metric tons last month, the most since February.  Gold shipments to China jumped to 12 tons after averaging around three tons during the previous four months. Shipments to Hong Kong increased to 24.7 tons, the most since April. Switzerland exported 58.5 tons to India last month, the largest shipment year-to-date and nearly twice the average monthly volume, UBS says. Meanwhile, September gold imports into Switzerland were also high at 194.6 tons. Inflows from the U.K. jumped to 63.3 tons from 8.6 in August. "This suggests that a good portion of investor liquidations in September, that pushed the prices through the $1,200 psychological level, were absorbed by physical demand, with metal making its way from London vaults into Swiss refineries for refining/recasting and ultimately shipped to physical buyers in Asia," UBS says. "This scenario is reminiscent of what happened in 2013 when gold prices collapsed, albeit the volumes this time around are much more contained. Nevertheless, it does highlight the importance of physical markets in providing support during times when gold needs it most."