Copper Being Stockpiled. Issue?

April 12, 2013

According to the WSJ, two commodities trading firms are amassing much of the physical copper in the world at their warehouses. This concentration has created concerns that industrial supplies of the material could become scarce or even unobtainable in the event of a major demand increase or mine disruption.

A similar pattern for aluminum and zinc has already played out, and the wait time to receive those metals has increased in recent years. Given the extent to which copper is used, a similar lengthening of the supply chain times could have a very adverse affect on a great number of key industries and result in a further weakening of the economy and job losses.

In addition to increased wait times, such a large percentage of the metal in the hands of so few is a recipe for corruprtion and price fixing. And, it will be very difficult for these firms NOT to increase the wait times as an excuse for increasing the pricing, either as a reaction to “shortages” or as an incentive for customers to pay more to get to the front of the line.

Watch this closely. It may cause price increases and supply disruptions to cascade through the system.

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