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... but could a copper ‘hoarding’ report indicate future problems?

On April 12, The Wall Street Journal carried a report that said two major commodities-trading firms are hoarding huge supplies of copper, paying above market rates to do so.

The story said that physical copper in LME warehouses has surged 84% this year to 590,175 metric tons, a 10-year high. The increase, more than 270,000 tons, is almost double expectations for the 153,000 ton surplus of copper that experts predict will emerge this year, evidence of warehousers' success in attracting metal from the open market into their sheds," it said.

"This concentration of copper supplies has sparked concerns among industrial consumers of the metal," the story said, noting that copper prices have fallen since February, "but some manufactures and builders are said to be worried about a possible shortage if demand for copper rises." Excess supplies, it reported, are said to be stacking up in warehouses owned by Glencore International and Trafigura Beheer, according to global traders.

The WSJ story said that the warehousing was noticed as "copper began piling up in unusual places," including  ports that not known as a metal destination. It reported that 60% of the increase in stockpiles this year took place in Antwerp, Belgium, and Johor, Malaysia, at warehouses, many owned by the two trading firms, that previously held little copper. It noted that the companies may not own all the copper but they do charge for its storage and assess fees for moving it, which leads to a different problem, which is the time it takes to move the copper, which for Antwerp could be as long as 25 weeks.

The story said there are worries that this trend could affect the copper market, as seen in an e-mailed statement from Southwire Co. in the WSJ article. "The current situation, where LME warehouse owners are paying huge incentives to attract copper, and then have those units subject to long load-out queues, is effectively making that copper unavailable for immediate delivery to serve industrial consumers."

In the WSJ story, Glencore declined to comment. A spokeswoman for Trafigura also declined to comment on the company's role in the warehousing system, but noted that most of this year's increase in copper stockpiles is due to slowing demand from China and rising mine production.

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