|These are crazy times in the base metal markets right now, with seemingly all of them in deficit, partly due to fundamentals such as supply disruptions and partly due to financial instruments. |
I can't recall ever seeing copper futures in such steep backwardation, or the copper price making 20 cent a pound moves day after day. Copper inventories in Shanghai have never been this low, and over 90% of the copper in LME warehouses is subject to canceled warrants, indicating that it will be removed from the warehouse and thus is not available to the market.
IF IVN is to make it to such lofty heights, which I consider unlikely, this is certainly the fundamental background it will require.
Of course, not all this copper is actually 'disappearing'. With all this uncertainly and shortness of supply, purchasers are building up higher than normal inventories which could be sold off again, albeit likely at a loss, if conditions change.