FCX announced this morning that its Grasberg mine, second largest in the world (I think) remains closed, declares force majeure on it's contracts because it has run out of concentrate stockpiles, doesn't know when the government will allow reopening, what new conditions may be imposed, and is losing 3 million pounds of copper and 3,000 oz of gold production each day the mine is closed. Yet its stock is up over 2% on such good news while scco is up one percent.
Yeah, Grasberg closed decreases copper supply which is good for copper prices. How much money can FCX make on higher copper prices with Grasberg production while the mine is closed? Truly a nutso market.
dar200 - There is a very interesting article regarding copper on ZeroHedge. It shows up as the first item when I Google the phrase "bronze swan".
A quick overview (as quick as I can be on a complex subject): The days of thinking about supply and demand mattering may be long gone. It seems that a number of financial firms in China found a way to use base stockpiles of commodities to lend, lend and relend over and over again, going in a lovely loop between an onshore part of their organization, and an offshore part. In some convoluted way, this allowed them to make/scam lots of money out of the system. That same activity in turn puts upward pressure on the yuan, and the Chinese gov is finally stepping in and putting a halt to the whole mess.
The "unwind" of this bad activity is in question. Any Western-minded country would find itself with large stockpiles of excess copper lying around, purchased not because it was needed, but because it was a base enabler for a rehypotihcation loop-scam. They would sell a bunch of it back into the market, and/or curtail further purchases. That would be bad enough, perhaps, to more than offset the supply side disruptions like the FCX one you mentioned and the recent landslide in Utah. I think Goldman Sacks (whom I despise) have a forecast out for copper to fall in price thru 2014.
I think there is still a possibility that China may have a mentality and behavior that isn't Western. They may be happy to crush some bad financial shenanigans on the one hand, and simply take ownership and hold onto the copper stockpiles with the other. They tend to play longer term strategies, and aren't driven by a short term profit/loss motive.
Very interesting article.... thank you for posting the "bronze swan" link.
This article proves how the supply/demand ratio can be subverted in ways few can understand or even imagine by those "speculators" who try to make an easy buck with their "paper schemes" at the risk of distorting the" real market" and harming those involved in the "real market".
If these "speculators" spent half as much time and effort in making improvements to their economies/societies than they do in developing "paper schemes" to fleece those economies/societies the world would be a much better place.
Seems to me with all of the data being "collected" by certain countries (China included), schemes of this nature could be exposed and curtailed on a more timely basis ...... if the desire to stop them really exists. On the other hand, using "collected data" may just expose just how invasive the ability to "collect data" really is. Moreover, all the "collected data" in the world does you no good if you're to stupid to understand what you have in-hand. Maybe that's why we're working so hard on "artificial intelligence".
In the final analysis information = power and power=money and money often leads to the corruption and control of (power over) political and economic systems ...... and this is a world-wide problem!
Have I just opened Pandora's Box with my comments? Wake-up folks.