Sunday, June 10, 2012

You cannot sell it to make the price go up - copper

 “Jiangxi Copper halts export program after one month” Chinese smelters export copper in response to domestic glut. China had been stockpiling copper when growth rates were double digits. Now that growth rates are more modest at 8 percent and there is a change in the mix of spending, smelters are sitting on too much copper. 

So what makes sense? Sell it on the world market outside of China. Unfortunately with China representing 40% of global demand, the impact is as expected. Prices started to fall and the remaining inventory is now worth less. You cannot just avoid price declines in a market with shrinking demand. The laws of economics do work. The inventory has to be held by someone and a change in ownership will have to be at the current price. 

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