Growth Narrative Confirmed - Dr.Copper Soars To 3-Year High (There's Just One Thing)

One thing is for sure, when Dr.Copper's price is falling, the silence from prognosticators is deafening; but when it's rising it is the greatest indication of the global growth narrative the world has ever known. However, there's a hole in that story...

LME Copper prices are up for 9 straight days - the longest wining streak since 2004 - (and 13 of the last 14 days) pushing prcies above $7,200 intraday - the highest since 2014...


And given copper's rip higher relative to gold, based on DoubleLine's Jeff Gundlach's favorite chart, 10Y yields should be drastically higher to reflect this implied growthiness...

There's just one problem with this whole narrative - it's not a desperate demand pull from rapidly growing economies that is charging prices higher... its a collapse in supply...

As Bloomberg reports, China ordered its top producer to halt output to combat winter pollution...

The advance in 2017 has been backstopped by supply disruptions just as the outlook for global growth improves and investors and miners target potential new uses, including in electric vehicles. The world’s largest producer, Chile’s Codelco, has forecast that prices may test record highs above $10,000, while UBS Group AG’s wealth management unit on Wednesday predicted further gains.

“Supply cuts are set to boost prices in the short term, while further upside beyond $7,200 before the Lunar New Year might be limited,” Pu Honggang, an analyst with ITG Futures Ltd., said from Xiamen, referring to China’s nationwide break that falls in February next year.


“It’s still pending that supply will be shrinking to what extent, while domestic demand is very weak at year-end.”

Copper’s latest leg up follows news that Jiangxi Copper Co., China’s largest producer, had been ordered to stop output for at least a week before a further assessment based on local pollution levels. Earlier in the month, the No. 2 smelter, Tongling Nonferrous Metals Group, was asked to make similar cuts.

“Copper stocks are rising as investors are bullish on copper prices amid an improving demand outlook from the U.S. and Europe in particular,” Yang Kunhe, an analyst with Pacific Securities Ltd., said by phone from Beijing.


“The production cuts are temporary. A one-week halt won’t cause too big a problem for Jiangxi Copper. Smelters can also adjust by moving forward their annual maintenance.”

And so a surging copper price could be misleading investors, and not everyone is buying its bullish implications...

“Big data shifts this time of year should be taken with a pinch of salt,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Hellerup, Denmark said via email.


“The market is long and in a thin market such news will support a strong end-of-year finish.”


tropicthunder Wed, 12/27/2017 - 12:21 Permalink

Its all total bullshit.. HG prices are primarily determined by the amounts hoarded, swapped, leased or dumped by the Vampire Squid at their Jersey Warehouses.

Quantum Bunk Wed, 12/27/2017 - 12:30 Permalink

It appears that they did the impossible. They prevented the 2015 recsession from happening. now we are on the way up austrian economics is dead. forever.

bshirley1968 Wed, 12/27/2017 - 12:45 Permalink

Just like in the '30's, they will dump milk in the ditches to inflate prices.  They have two options:1. Lower prices to find demand point and maintain market dynamics.2. Reduce production, create demand, and raise prices.They will never consider #1.......their DEBT SERVICE will not allow it.  Debt DEMANDS higher prices or increased production.  Whatever it takes to drive the creation of more money, i.e. DEBT.

Entitled_TD bshirley1968 Wed, 12/27/2017 - 13:32 Permalink

 This is the most insightful post i've ever seen on ZH!  It simultaneously encapsulates/summarizes the dynamic of our economic system, points to the lie of capitalism and "free enterprise"/libertarianism , and shoots down every troll poster on the site from the beginning of time to now.  It should replace all articles and posts on ZH for the next decade or the fools at ZH change their colors.  If i may, bshirley1968, i'd like to make your observation even more concise:debt=power over peoplewhich implies the greater the debt, the greater the power over people.But our economic system is an artificial construct that sits on top of a natural system (the biosphere) which is the subsidy/gift/seed corn that the people are forced to expoit/destroy to pay the masters (owners of debt).  Ironically, the masters are not the evil geniuses they are made out to be and the earth cannot give infinitely, so they will ultimately destroy themselves (and us with them) unless we overthrow the masters and come up with an economic system that can work in balance with nature. 

In reply to by bshirley1968

Bring the Gold Entitled_TD Wed, 12/27/2017 - 13:37 Permalink

Fantastic posts by both you and bshirley1968. Debt is choking all life on Earth. We need a new system for a new reality. With increasing robotic automation and AI etc we desperately need a new system. Of course Oligarchs like Bezos want that system to be permanent global aristocracy which would be fine with me except they want everyone else to be starving landless serfs.

We have the technology now to take care of everyone on earth and heal the ecosphere Ducks Unlimited style resource management aka tending the garden of creation. There was a time where scarcity was the issue facing humanity. It is now artificial scarcity and debt that are creating more problems than they solve. We need a monetary reset and move in a radically different direction that addresses modern realities on a finite planet.

In reply to by Entitled_TD

Bring the Gold morethan1 Wed, 12/27/2017 - 14:44 Permalink

I trust the wisdom of the Founding Father’s as well. However they made a government not an economic system. They also didn’t have robots let alone computers. The world has changed a lot since 1789. The Founding Fathers were extremely wise in terms of understanding how to balance power in government. Although, obviously the Republicans and Democrats have annihilated the constitution in case you’ve been in a coma since oh 12/24/1913.

In reply to by morethan1

PitBullsRule Wed, 12/27/2017 - 13:38 Permalink

And now days they use plastic pipes in houses instead of copper sometimes, PEX is cheaper and easier to install, so maybe reducing demand for copper a little bit.  Its less likely to burst when it freezes too, and of couse, copper is a nuerotoxin, so there's that.

presidentsarkozy Thu, 12/28/2017 - 11:44 Permalink