HOTTER ON METALS: Commodities finance concerns drive copper

Commodities financing in emerging markets like China has perhaps always had an element of risk attached, but the events of the past week in Qingdao have shown just how precarious the activity can be.

An investigation into the alleged fraudulent use of warehouse receipts to obtain finance has halted some shipments at the port, located in Shandong province. The authorities are investigating the situation, and banks and warehousing companies have sent executives to the seaport to see whether and how much of their own material might have been affected.
While the bonded zone premium has sharply fallen, the impact on the copper spreads has been even more pronounced.
The front end of the copper curve has flattened, with the cash to three months spread in particular dropping from multi-year highs.
The London Metal Exchange copper backwardation has moved from about $100 at the start of the week to about $6 currently.

The June-September backwardation on the Shanghai Futures Exchange narrowed to...


Andrea Hotter

June 06, 2014

17:05 GMT

New York