The ICSG global balance sheet shows a 170,000-tonne refined-production/supply deficit, which has grown steadily since the summer. The market is in better shape than last year at this time when the balance sheet showed a 429,000-tonne deficit, but with the fragile state of the global economy and the stream of financial problems every region is struggling with, that is a fairly tight balance sheet.
However, the ICSG data for China obviously do not include the powerful recovery in Chinese imports over the past few months. After including apparent demand implied by Chinese buying patterns and the continuation of weak output in Chile, the deficit is surely higher than the ICSG’s dated report.
CFTC data show that commercials remain heavily long this market, which means that commodity funds are still heavily short and are playing the recession card in this and most other markets. At many trading desks it has become somewhat sacrilegious to be bullish, particularly when it comes to markets that should normally be ultra-sensitive to the economic environment.
Some of the bullish indicators cited above are admittedly tentative. One disappointing month of Chinese import data can send the market into a tailspin. Many analysts still have hopes that new production expected to come on line in Chile will soon facilitate a recovery in mine production. Still, the balance of evidence at the moment favors the lonely bull.
Buy March copper, risking $3.30 per pound, close only.