by Steve St. Angelo
It looks there may be trouble ahead for copper. This goes well beyond the falling copper price and annual surpluses.
According to the article, China’s True Demand For Copper Is Only Half as Much as You Think:
For years, traders on the mainland have used copper as collateral to finance trades in which they borrowed foreign currencies and invested the proceeds in higher-yielding assets denominated in renminbi. This carry trade with Chinese characteristics allowed them to net a tidy profit.
(As an aside, however, the devaluation of yuan in August prompted analysts to wonder whether this trade has reached its best-before date—something that would have implications for the future global demand for copper, if true. Meanwhile, there have been persistent rumors of regulators cracking down on such trades.)