We told you to sell base metal miners on 15/5/22. That was a good call.
As with other l/s call such as "short gold" in Nov 2020, it received critisism.
Let us now review what happened with Dr Copper (one proxy) since.
1/n 🧵👋 #copper
As with other l/s call such as "short gold" in Nov 2020, it received critisism.
Let us now review what happened with Dr Copper (one proxy) since.
1/n 🧵👋 #copper
https://twitter.com/BurggrabenH/status/1525832468267417603?s=20&t=LNvb6mPZCTB_3n0E1MpJ6A
Starting June 2nd, Cu collapsed 29% in less than six weeks. How often did that happen?
Answer: not often! In past 25y Cu crashed only 8x >7% in a single week as in one week this June (stat below) & only 29x >5% (2x per week in June & July 2022).
Big quantamentel signals!
2/n
Answer: not often! In past 25y Cu crashed only 8x >7% in a single week as in one week this June (stat below) & only 29x >5% (2x per week in June & July 2022).
Big quantamentel signals!
2/n
How is that possible, when global reported inventories (LME; Comex; Shanghai) are below their 10-year average? Aren't commodities priced on inventories?
Chart: Global Cu inventory (reported by exchanges); Source: Bloomberg
3/n
Chart: Global Cu inventory (reported by exchanges); Source: Bloomberg
3/n
Answer: Copper price has zero correlation to reported inventories & as we explained below.
Instead, copper is best explained by paying attention to the Aussie $ as a proxy for China.
Why? Because China consumes 50% of copper!
4/n #AUD
Instead, copper is best explained by paying attention to the Aussie $ as a proxy for China.
Why? Because China consumes 50% of copper!
4/n #AUD
https://twitter.com/BurggrabenH/status/1398098074493456385?s=20&t=LNvb6mPZCTB_3n0E1MpJ6A
Were we to able to track Cu inventories (in ALL warehouses) as we can for oil (satellite data; open tank farms), there would be good correlation.
But we cannot. Too much inventory remains UNREPORTED.
Listen to Simon below.
5/n
stitcher.com/embed/207490/8…
But we cannot. Too much inventory remains UNREPORTED.
Listen to Simon below.
5/n
stitcher.com/embed/207490/8…
How else can we possibly confirm that the market may not be as tight as reported in reported (exchange) inventories?
For one, by looking at timespreads. 3-month spreads for the futures curve are in contango ($19.50/t).
Hardly a sign for tighness. There is more...
6/n
For one, by looking at timespreads. 3-month spreads for the futures curve are in contango ($19.50/t).
Hardly a sign for tighness. There is more...
6/n
Treatment Charges (TC) for Cu concentrate (70% of mined Cu) are at $84/t (+160% since March 21).
Were Chinese smelters desperate to get a piece of the party (margin squeeze), they would on basis of a raising price outlook (but they know their order books).
7/n @kittysquiddy
Were Chinese smelters desperate to get a piece of the party (margin squeeze), they would on basis of a raising price outlook (but they know their order books).
7/n @kittysquiddy
Meanwhile, Chinese scrap copper trades at a healthy discount to refined copper (below 99% cathode premium to scrap).
Another data point in the Cu puzzle that does not suggest tighness.
8/n
Another data point in the Cu puzzle that does not suggest tighness.
8/n
Commodities trade at the margin, not on a narrative.
The time will come for the green shift to use meaningful amounts of Cu. And yes, supply will disappoint l-t (NIMBY / ESG issues).
But in commodities, one should respect d/s now, not in 2025.
9/n
The time will come for the green shift to use meaningful amounts of Cu. And yes, supply will disappoint l-t (NIMBY / ESG issues).
But in commodities, one should respect d/s now, not in 2025.
9/n
https://twitter.com/BurggrabenH/status/1530647932113911813?s=20&t=LNvb6mPZCTB_3n0E1MpJ6A
In sum, you should't mix up the cyclical with the structural (green shift) setup.
The former is the eco slowdown in the here & now.
The latter is compliance driven & here to stay for decades to come (but irrelevant in 2022/23H1).
10/10 End/ Thx!
The former is the eco slowdown in the here & now.
The latter is compliance driven & here to stay for decades to come (but irrelevant in 2022/23H1).
10/10 End/ Thx!
https://twitter.com/BurggrabenH/status/1450153452055801857?s=20&t=LNvb6mPZCTB_3n0E1MpJ6A
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