It appears it’s not just oil that’s defying supply and demand fundamentals, with prices rising in the face of growing inventories.
As Reuters reports on Friday copper and aluminium prices are doing much the same thing (our emphasis):
LONDON, July 31 (Reuters) – Copper and aluminium prices struck multi-month highs on Friday, fuelled by economic data suggesting global economic recovery may be on the way, although analysts warned against too much optimism.
Copper for three-months delivery on the London Metal Exchange hit $5,747.75 a tonne, its highest since early October. The metal used in power and construction traded at $5,715 in official rings from a close of $5,601 on Thursday. Aluminium traded at $1,885 from $1,879, and earlier reached $1,894.75, its highest since mid-November. “The factors are economic optimism, rising stock markets, and a weaker U.S. dollar, but not fundamentals,” Commerzbank analyst Eugen Weinberg said. “These hopes will fade then we’ll see quite a strong correction.”
Copper is up more than 80 percent so far in 2009, supported by buying from China, the world’s top copper consumer. World stocks struck 9-1/2 month peaks, with investors continuing a recent spree of buying risky assets. But analysts warned the journey out of the downturn was likely to be slow and investors were also cautious ahead of gross domestic product data from the United States, the world’s largest economy, later in the session.
A weaker dollar also helped copper, making dollar-priced material cheaper for holders of other currencies. Copper edged from contango into a slight backwardation of $2.5 — a premium for cash copper over the three-month contract. “Copper has nearly doubled this year so you’d expect to see some backwardation, stocks are low by historical standards,” an LME-based trader said.
Meanwhile, here’s a nice chart from Danske Bank showing the oxymoronic state of aluminium stocks and prices in the last two weeks:
Related links:
Refining, the weakest link in the recovery – FT Alphaville
BP results, ‘demand is in the toilet’ edition – FT Alphaville
The Commodity Conundrum Solved! The Hidden Parameter in Interest Rates - FT Long Room