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Copper warehouse finance deals taking off, analyst says

Keywords: Tags  copper, financing deals, warehouses, LME, Edward Meir, INTL FCStone, Andrea Hotter


WASHINGTON — Copper financing deals are starting to increase despite the relatively poor returns compared with aluminum, a senior analyst at INTL FCStone Inc. said.

Currently, the cash-to-April spread on London Metal Exchange copper prices is in a contango of $97, which is equivalent to a return of 1.4 percent, senior analyst Edward Meir said.

For aluminum it is $70, or a return of 5.2 percent, for the same period, he told delegates April 25 at the American Copper Council meeting in Washington.

"Despite the poorer returns, the rapid accumulation in copper stocks (in LME-listed warehouses) suggests stockpiling schemes, especially with incentives topping up returns," Meir said, referring to warehouse companies’ practice of paying either side of $100 per tonne in locations like New Orleans, Antwerp, Belgium, and Johor, Malaysia, in order to attract metal into storage (amm.com, Oct. 8).

Meir noted the rise in stocks in LME-approved warehouses to 10-year highs, and the suggestion that some of this metal might have been acquired by JPMorgan Chase & Co. and BlackRock Inc. to offset the roughly 180,000 tonnes they will need on a combined basis for their respective physically backed exchange-traded funds (amm.com, Feb. 25).

But Meir said this is probably not the reason for the rise in stocks, especially since the two ETFs haven’t yet been launched.


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