RE: Ft27 Feb 2019 08:10
Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/318a3832-39c9-11e9-b856-5404d3811663?desktop=true&segmentId=d8d3e364-5197-20eb-17cf-2437841d178a#myft:notification:instant-email:content
The chief executive is not alone in feeling more optimistic about the outlook for metals prices because of shrinking stockpiles at warehouses licensed by the London Metal Exchange, Comex and the Shanghai Futures Exchange.
It was also flagged this week by US miner Freeport-McMoran, which noted trackable copper inventories had dropped 40 per cent to 400,000 tonnes over the past year.
The warehouse systems of the big exchange operators play a key role in the global metals industry, providing a market of last resort for buyers and sellers.
There are several reasons why exchange stocks have dropped sharply over the past year. These include stricter rules in the LME warehousing system, solid demand and a lack of new supply.
After big mining houses had a near-death experience in the savage price rout of 2014 to 2016, they have been focused on reducing debt and spending rather than investing in new projects.
Across the industry, for example, capital expenditure fell to $38bn last year from a peak of $77bn in 2012. This year spending should recover but only to its long-term average of $43bn.
As Mr Glasenberg is quick to point out, most of the spending is to maintain facilities, rather than expand them.
“There are not many new mines being built around the world,” he said. “So we have limited supply coming into the market. And demand hasn’t been bad.”
Exchanges’ stocks, however, are only part of a wider inventory picture that includes the metal held by big manufacturers and processors as work in progress.
As such, they are not necessarily an accurate reflection of stock levels throughout the supply chain — especially in China, the world’s biggest consumer of commodities — and should be treated with a degree of caution.
Brokerage Liberum reckons downstream copper inventories actually increased in China last year, meaning exchange stocks could grow quickly if demand slows.
But, for now, emptying warehouses are providing a boost for metals markets, which have also been aided by easing US-China trade tensions.
Copper has gained 10 per cent since the start of the year to an eight-month high close to $6,500 a tonne, while zinc has risen 11 per cent and nickel — a notoriously volatile metal — is up 20 per cent.
Sign In
Follow the stocks
