The Reason For Copper's Dramatic Surge: Chinese Copper Inventories Hit Record

Tyler Durden's picture

Two weeks ago we reported that one month after China created a record $520 billion in total credit (TSF), through February 18 Chinese banks had followed through with another CNY2 trillion according to MarketNews, meaning that in the first two months of the year China will have created a gargantuan $1 trillion in new credit between loans and unregulated shadow banking issues.

 

A question that emerged is what China is spending all this newly created money on. One answer emerged overnight when Bloomberg reported that after tumbling in the first half of 2015, copper inventories at the Shanghai Futures Exchange had been steadily rising, and in the most recent week soared by 11% to an all time high of 305,106 tons.

At the same time reserves at the London Metals Exchange declined for 11 days to the lowest level in more than a year, in other words China is shifting idle inventory from Point A to Point B.

 

Bloomberg adds that as a result of this massive spending spree, inventories tracked by the Shanghai Futures Exchange are higher than stockpiles monitored by the London Metal Exchange for the first time in a more than a decade.

This explains two things:

  • for all talk of reform, China is once again building a bubble in excess capacity and stockpiling surplus commodities, which will likely last as long as China floods the economy with newly created bank loans;
  • The recent surge in the price of copper, which has been a direct function of China's recent massive restocking

 

Most importantly, this means that the world is now back to the "old regime" China, where it was stockpiling massive amounts of inventory as only possible the "use of capital" of trillions in new money created, which of course is precisely the "regime" that created the hard landing scenario that China finds itself in at this very moment.

And so, can kicked. The only question is for how long.

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xrxs's picture

Harder landing.

besnook's picture

this is about war preparations in the event the zionazis decide china must be taken down for their own omnipotence as the rulers of the world. that is the lesson they learned from the baiting and attack on japan leading to ww2.

Consuelo's picture

You're onto something there. 

 

That, and the 'Silk road' project is a very large and ongoing operation.   They will not have to worry about outside strangulation of the metals pipeline in order to carry on.

 

 

besnook's picture

the silk road is probably the main reason the usa will go to war with china. there are 4 billion people on that road who will soon be trading 100s of billions of dollars worth of goods without using the dollar. the dumbfucking zionazis created the incentive for china(and russia) to do this with their bellicose treatment of noncomplying states over the years. using war as the diplomacy of first resort has a way of creating resentment and blowback. their arrogance has refused to reveal their stupidity to themselves. of course, we are all fucked because of them.

Element's picture

China's own production of copper is very high, or has been, recently. Plenty of domestic supply.

http://www.indexmundi.com/minerals/?product=copper&graph=production

SuperRay's picture

WTF! Can someone please explain to me how the fuck the s&p has rocketed up, along with oil, when not a single trigger for this happened?  Is it because they expect more easing? so why would Draghi, or Yellen, or the BOJ do anything when the market is back to a level before the selloff? Who or what is driving this bullshit ramp?  I'm dying to pile into SDS.  Tell me why I shouldn't.

tarsubil's picture

I'm afraid we are getting very close to S&P's last hurrah.

besnook's picture

yours is not to wonder why. yours is but to do and die.

JedClampIt's picture

It's all about $/yen and crude oil.  Those will be your sign to go long short ETFs

Goldbugger's picture

They are stock piling Hard Assests. Physical metals,

Pumpkin's picture

Oh, there was 'news'.  That's always bullish.

SmittyinLA's picture

China has about a 600B annual trade surplus with the US, if I were them I'd buy copper till dollars were rejected, trade the fiat for real wealth ASAP.

You can't have too much copper, you can trade copper- later for electricity-and still keep the copper!

Can you generate electricity with copper? yes

Does copper wear out? No

Does copper decay like fiat? No

Copper is real.

HenryHall's picture

Copper is money too.

Gold, silver, copper. All traditional money for large, medium, small denominations.

Copper hoarded away is better than dollars in the bank.

RedDwarf's picture

They are not hoarding copper as money.  They are hoarding it for potential war.  Bullets, machines, other essentials.

nofluer's picture

"Copper is real."

...sometimes... and sometimes not.

silverer's picture

A possible new use for Chinese copper would be building idols for idol worshipping. The world will be there again, soon.

David19841776's picture

Copper is needed for bullets. They are preparing for war. We do not even have a lead smelter in the USA any more. Get ready its coming

nofluer's picture

ROTFLMBO!!!

And I'm betting that China is putting all those copper inventories in "bonded padlocked warehouses" too!!!

A few years ago, the story goes, China learned that they could borrow money from the West at reduced rates if they had HARD assets under bond for security. So Lo and Behold all of a sudden large warehouses began springing up with padlocks on the doors... the story was that China was putting copper in them as security for loans.

Time passed and for some reason, they started opening those padlocks and finding... a lot of air, and maybe some pigeon crap.

So... now China is having financial woes so they are "buying copper" again...

ROTFLMBO!!!!

I'm probably wrong... but then maybe not.

Element's picture

Why not, they can get copper for imaginary digits.