I have been following the work of Tom McClellan for years now, and enjoyed the chance to sit down and have a few beers in Seattle a few months ago. Tom puts together some really nice charts and studies, often lagging the data in order to find relationships that may otherwise not be apparent.
Below is an excerpt and chart before the download:
“Since bottoming in October 2012, inventory levels of copper have risen 190% in warehouses operated by the London Metals Exchange. That’s a huge and rapid increase, and it conveys a powerful message about the future for copper prices.
Back in September 2012, spot copper prices topped out at $3.81/pound, and they have now fallen 18%. In terms of big drops in copper prices, this one does not rank very high among the big drops in copper prices over the past few years. But it is producing a huge and rapid rise in copper inventories.
It is normal for prices and inventory levels to generally move in opposite directions. When copper producers don’t like the market price and think that they can get a better one by waiting, they put their production into warehouse storage and wait for better times. When prices rise up to or above a price level that the producers like, copper starts coming back out of inventory and onto the market. So watching copper inventory levels can give us insights about where the producers think a fair price is. ”
PDF DownloadCopper Inventories Rising