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Message: Re: Is the bull in Copper over? Finally, a positive signal for the copper market

http://business.financialpost.com/2011/10/06/cancelled-copper-warrants-soar-on-the-lme/#more-98262

Peter Koven Oct 6, 2011 – 9:35 AM ET | Last Updated: Oct 6, 2011 9:46 AM ET

Finally, a positive signal for the copper market.

Over the last several days, cancelled copper warrants have soared on the London Metals Exchange. They now stand at about 60,000 tonnes, an increase of more than sixfold from a few weeks ago. They are at the highest level in more than two years.

This is an important measure, because it suggests demand is about to rise. When a warrant is cancelled, it means that the metal is earmarked for delivery and the buyer is ready to take it out of the warehouse. So in this case, buyers seem to be taking advantage of the dip in copper prices to load up on the metal. Copper recently fell below US$3.00 a pound for the first time in more than a year, though it has rebounded since then.

Greg Barnes, an analyst at TD Securities, noted that the bulk of the cancelled warrants are held against copper in warehouses in Korea and Singapore.

“This could suggest that the metal is bound for China,” he wrote in a note. This underscores the belief that China needs copper after “significant” de-stocking in the first half of 2011, he added. By buying it now, China can re-stock the red metal at a price roughly 25% lower than it was over the summer.

Mr. Barnes noted that the last time cancelled copper warrants spiked so much was in March 2009. The copper price started soaring right after that as China jumped into the market and purchased huge volumes of the metal.

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