Wednesday, August 19, 2009

The Debts of the Lenders: Chinese Speculators Stockpile Copper

Great article from Bloomberg. The gist of it is that now you have pig farmers and housewives in China speculating in copper and nickel. Smells like a bubble to me.

My take on this whole story is to closely watch the Peruvian markets for signs of weakness. Why? B/c Peru is a large base metal exporter and the strength of its currency is closely tied to the shiny metals - specifically copper.

Pig farmers in Guangzhou province were buying copper or nickel, Liu wrote, citing CCTV. Residents in Wenzhou city of Zhejiang province, “famously investment savvy,” are reportedly using bank loans to stockpile copper scrap, with one merchant saying he has stored 20,000 tons, Liu wrote.

Housewives in Wenzhou may have stockpiled metals as “they just have too much cash on hand,” Eramet’s Deng said.

The People’s Bank of China scrapped lending quotas in November, triggering a record 7.73 trillion yuan of new loans this year. M2, the broadest measure of money supply, rose 28.4 percent in July from a year earlier.

Metal traders have reported incidents when “a rich man walked into our office and asked us what had been the lowest and highest prices of nickel,” Scotia’s Liu wrote. “After telling him those prices, he said the current price was low and he placed an order.”

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