Home > Sept 2017 > Sept 29, 2017 China Speculators Go Crazy in Copper Tonight, just before VaCa

Sept 29, 2017 China Speculators Go Crazy in Copper Tonight, just before VaCa

September 29th, 2017

Tonight we saw massive spike ups in the Shanghai Futures on the eve of China Economic Data and the start of their One week Holiday. Mainland China will be closed next week. In the second hour of the european trade our Futures are Flat. The Cyptocurrency Players in China are working around the Government, which is something that makes the Chinese Govt very concerned due to the fact it works around the limits that a Citizen can remove cash out of the country. Also, China will be closing down North Korean Biz in China (mainly restaurants) due to UN Sanctions and won’t be importing Oil, etc at the end of the month.

Sept 2017

  • Trading_Nymph

    From Reuters..SHANGHAI (Reuters) – Weeks after Beijing banned fundraising through token launches and ordered some bitcoin exchanges to shut, casting a chill over the cryptocurrency industry, traders say that the market is far from dead.

    While several exchanges have announced that they will close by the end of this month, traders have now moved to buy and sell bitcoin directly with each other on peer-to-peer marketplaces and messenger apps. Industry insiders say some overseas-based initial coin offerings (ICOs) are still being marketed.

    Although the crackdown has dissuaded large swathes of less-experienced investors from participating in the trade, market participants point to the limits Chinese regulators ultimately face in controlling the industry, where many users are anonymous and difficult to track.

    In the short-run, the crackdown has also created an arbitrage opportunity for investors, with the price of bitcoin in China now trading at a discount to overseas exchanges.

    “They can’t set rules to stop me from investing in what I want to invest in. They say you are protecting me, but as long as I think this is good, they have no way to intervene,” said a Chinese bitcoin investor named Victor, who declined to give his full name citing current sensitivities.

    “I can do over-the-counter trades or I’ll go offshore…My wallet is my wallet. I’ve never registered my identification card.”

    The Chinese government on Sept. 4 ordered ICOs to cease and soon after ordered some cryptocurrency exchanges to shut. Over 15 exchanges, including the three largest players OkCoin, Huobi and BTCChina, have since announced that they will close their mainland businesses by the end of September.

  • Trading_Nymph

    For this Tax Bill..per bloomberg, The fate of Trump’s promise of a historic tax revamp could be determined by six key Republican senators: Bob Corker, John McCain, Rand Paul, Pat Toomey, Orrin Hatch and Susan Collins. Some in the group have already laid out their demands for a tax bill.

  • panther341

    crude oil has gone into contango. The Dec 2018 contract (WTI) is essentially the same price as the Nov 2017 contract which is the present shortest contract.

    Also the spread with Brent has widened out. Brent is also in same sort of contango.

  • Trading_Nymph

    Panther Markets at all time highs and I just read a piece that even Paul Tudor Jones has taken up Algo.

  • Trading_Nymph

    THIS is the news that is bothering the heck out of me from Platts…Deliverable copper stocks fell 27% week on week to 103,151 mt in China’s Shanghai Futures Exchange warehouses Friday, while on warrant inventories slid 53.6% to 21,680 mt over the same period.
    Deliverable stock is the amount of metal available in the warehouse. On warrant stock is the amount of metal which is good for delivery.
    These warehouses are in Shanghai Guangdong, Jiangsu, Zhejiang and Jiangxi.
    Shanghai deliverable stocks fell 30% week on week to 72,729 mt Friday; Jiangsu slipped 56.6% to 5,598 mt; Guangdong rose 1.4% to 23,174 mt; and Zhejiang was steady at 1,650 mt. Jiangxi currently has no stocks.
    For the on warrant inventories, Shanghai slipped 17% week on week to 16,109 mt Friday; Guangdong fell 5.8% to 2,849 mt; Jiangsu dropped 75.2% to 2,347 mt; Zhejiang fell 21.1% to 375 mt. Jiangxi currently has no stocks.
    Meanwhile, prices of the 12 copper futures contracts, which run from October 2017 to September 2018 on SHFE, closed Friday higher at Yuan 51,580-52,900/mt ($7,765-$7,964/mt), up Yuan 1,700-2,210/mt week on week.
    China is closed October 1-8 for the National Day and Mid-Autumn Festival holidays.
    Front-month October futures on SHFE closed at Yuan 51,580/mt Friday, up Yuan 2,010/mt from last Friday, while the most actively traded November contract closed at Yuan 51,840/mt, up Yuan 2,210/mt week on week. The traded volume for the 12 copper contracts totaled 2,849,880 mt Friday, up 4.6% over the same period.

  • Trading_Nymph

    Panther, China is going to cut Copper Imports cuz IMHO China is slowing and wants to cut down Copper Levels that are unknown but big in bonded warehouses, etc. The world should say, WAIT, Copper is just being bought up before the Ban..we should get out, this isn’t Global Growth. Yet, Everyone is buying this up?????? I just don’t get it????? From Platts…China ban on copper scrap imports seen likely
    Sep 28, 2017 | 01:35 PM |
    Tags MEP, China scrap imports, Category 7 copper scrap imports

    SHAGHAI — China is already enforcing some restrictions on copper imports, cutting quotas and limiting the number of licenses in some regions of the country, sources told AMM sister publication Metal Bulletin, although a ban on copper scrap imports has not yet been confirmed.

    According to speculation that has been rife since July, China could ban Category 7 copper scrap imports from 2019, even though the latest imports category for solid waste released by the Ministry of Environmental Protection (MEP) maintained Category 7 copper scrap under the list of “restricted imports” or “limited imports” rather than “forbidden imports.”

    Still, market participants are confident that a ban will come into effect in 2019 given that such a policy is in line with the country’s leadership strategy.

    A reform group led by Chinese President Xi Jinping met in April to discuss a range of policy changes, including significant reductions in the categories and volumes of waste imports.

    Although an official statement on the ban has not been announced, stricter measures have been taken by both the MEP and Customs on scrap imports.

    Import licenses harder to secure
    Several sources directly involved in the copper scrap trading business have confirmed to Metal Bulletin that trading firms are unable to get 2018 import quotas and that all scrap business must occur directly between overseas sellers and domestic end-users.

    For the copper scrap imports business, local buyers and users require a domestic consignee certification. This is issued by the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (AQSIQ) before any involvement in the business. It must be renewed every three years.

    For importers, a license, which is issued annually by the MEP, will be a prerequisite for traders and end users alike.

    All licenses are due for renewal during the fourth quarter; however, traders will no longer be able to secure them for 2018.

    “It’s something that’s already happening. Reducing the number of market participants in this business will also help the regulators to implement (the) new rules,” one scrap end user said.

    In an official announcement in July, China’s State Council ordered related departments to reduce imports of solid waste, as well as to improve the import license system and halt trading-agent imports.

    Scrap market participants widely agreed that 2018 will be a transition year, during which much stricter rules governing imports will be enforced gradually, lowering the risk of volatility when the ban comes into effect in 2019.

    But those Chinese companies that have already set up an overseas presence to trade scrap will still be able to sell to Chinese end-users via their non-domestic units, one scrap trader claimed.

    Import quotas shrinking or disappearing
    When a company is granted an import license from the MEP, a quota will be agreed to based on that company’s trading volumes during the previous year.

    But some of the quotas already approved for 2017 have been withdrawn by the MEP, and quotas for 2018 are expected to be reduced further.

    Several scrap importers in China’s Guangdong province have had their quotas reduced, and fresh quotas for 2017 were mostly canceled, sources told Metal Bulletin.

    “Not only have quotas been reduced, but Customs is also carrying out stricter inspections over imports, so it’s also in doubt if you can fully use the rest of the quota,” one Guangdong-based importer said.

    Tightness in imported copper has been felt in some regions, where some rod producers are seeking refined copper as a raw material to replace scrap, market participants said.

    Domestic cathode has continued to trade at premiums of around 160 to 250 yuan ($24 to $38) per tonne this week.

    Fourth-quarter imports in focus
    Trading in scrap in August remained solid, even though futures prices retreated from three-year highs when buyers and sellers came back to the market while prices stabilized.

    According to Metal Bulletin’s assessment for No. 2 copper of US or European origin with copper content of 94% to 96%, the discount to London Metal Exchange or Comex prices increased to 29 to 32 cents per pound ($639 to $705 per tonne) on a cif basis on September 25, from 32 to 34 cents per pound at the end of August.

    “Some importers will try to use up their quota by the end of this year, so imports during the fourth quarter are likely to be high,” one copper scrap importer said.

    In August, China imported 309,767 tonnes of copper scrap, down 1.67% from last year but up 7.83% month on month, Chinese Customs data showed.

    Imports in the first eight months of this year totaled 2.45 million tonnes, up 13.65% from a year ago.

    Hong Kong, the US and Australia have been the top three sources of copper scrap in 2017, with imports totaling 438,770 tonnes, 339,169 tonnes and 304,379 tonnes, respectively.

  • Trading_Nymph

    Agree with Bloomberg…“There’s a good long-term story in copper,” Liberum’s Knights says, but the tale isn’t that appealing from now through 2019. “We’ve got two years of surpluses ahead, and if you combine that with the potential for slowing Chinese demand, then the price could come off relatively quickly,”

  • Trading_Nymph

    From CNBC…China still stocking up on metals and credit, private survey says
    The China Beige Book, a private survey of Chinese businesses, said in an early brief of third-quarter data that companies are stockpiling commodities without using them.
    Companies in the commodities industry saw a drop in revenue, profits and other lines of business.
    The China Beige Book also found that Chinese companies are still borrowing, despite national efforts to cut back on loans.
    Evelyn Cheng | @chengevelyn
    Published 6:14 PM ET Tue, 26 Sept 2017
    Pedestrians walk past cranes and residential buildings standing under construction in Beijing, China.
    Tomohiro Ohsumi | Bloomberg | Getty Images
    Pedestrians walk past cranes and residential buildings standing under construction in Beijing, China.
    The China-driven surge in commodity prices could soon come to an end, according to a private survey of Chinese businesses.

    Contrary to “markets’ unremitting faith in the Chinese government campaign to combat” oversupply in metals, “firms are saying quite the opposite. For the sixth quarter in a row, coal, aluminum, steel, and copper each saw capacity rise on net,” according to the China Beige Book’s early brief of third-quarter data released Tuesday.

    “Sector-wide growth took a dive across the board—revenue, profits, output, export orders, volumes, hiring, capex, borrowing, wages, and sales prices,” the report said.

    The China Beige Book is a quarterly survey of Chinese companies in an attempt to present a more accurate picture of growth. Many question the accuracy of most Chinese government data, since officials may have incentive to inflate or deflate the figures they report in order to show compliance with central policy.

    Far Eastern Group Chairman on excess capacity in China
    11:15 PM ET Mon, 25 Sept 2017 | 02:18
    “There has been for the past year and a half a desire to not think too much about China,” Leland Miller, chief executive officer of China Beige Book, told CNBC. “I think you’re at a point right now where there’s been a complacency on the part of the Chinese economy that is lending itself to unrealistic expectations about the economy that are not going to be met.”

    Copper prices have rallied more than 25 percent this year to a three-year high on bets for stronger global growth, primarily out of the world’s second-largest economy, China. But the metal has since come off those levels to trade about 16.5 percent higher for the year.

    Morgan Stanley echoed some of the China Beige Book’s concern in a Monday report.

    “So in fact, the strongest price performances of 2017 (aluminium, zinc, lead, copper, nickel, alumina, iron ore) are based on either China’s reform-based supply shocks or global currency trades – not a sustained improvement in demand growth,” equity strategist Tom Price and a team of analysts said. They have negative price forecasts on aluminum, copper, iron ore and steel.

    Chinese companies aren’t cutting back on credit

    In its third-quarter survey of 3,300 firms and 160 bankers across 34 industries, the China Beige Book also found that companies borrowed at the second-highest rate in four years, contrary to widespread beliefs that China is reducing its use of credit to fuel growth.

    “Most of the year when the Chinese government has been talking about deleveraging that has not been evidenced in China Beige Book data,” Miller said. “At least part of the time corporations have had even easier access to capital and even when conditions have been tightening it has not contributed to deleveraging or slower deleveraging.”

    S&P Global Ratings downgraded China’s long-term sovereign credit rating to A+ from AA- last week based on “increased” risks to the economy and financial system from China’s “strong credit growth.” The move followed a similar downgrade by Moody’s in May.

    “We are still very concerned about China’s debt growth” but Chinese authorities have made a “good start” in limiting credit growth, James Daniel, assistant director of the Asia and Pacific Department at the International Monetary Fund, told CNBC Monday.

    The big question, he said, is “will the government continue with this [deleveraging] if and when the economy begins slowing?”

    That said, China’s economy remains one of the fastest growing in the world. The IMF said in August that it expects the world’s second-largest economy to average growth of 6.4 percent a year between 2017 and 2021, versus 6.0 percent last year.

    The China Beige Book brief also said that while the third quarter was weaker than the second, 2017 overall “still looks far better than 2016 and much of 2015.”

    “Profits are much better than last year, with even property contributing to that for the moment. Most importantly, hiring remains robust,” the report said. “The worry is not how the economy is faring now, but where it is headed.”

  • Trading_Nymph

    The world’s second-largest economy may be faring well this year but 2018 is shaping up to be less positive, with progress on reducing debt and industrial capacity proving elusive, according to China’s Beige Book.
    Although this year still looks “far better” than the past two years, faltering demand signalled by a reversal of the five-quarter commodity rally may be in store for 2018, according to the private survey released on Wednesday by CBB International.
    The study collects anecdotal accounts from more than 3,000 firms in a format similar to the US Federal Reserve’s Beige Book.
    President Xi Jinping has been overseeing a reassertion of control over the economy and financial system this year, in the lead-up to the twice-a-decade Communist Party leadership gathering scheduled to convene next month in Beijing.
    With some track record in calling pivot points, the Beige Book report said its survey evidence raised questions about some of the key perceptions about the economy’s progress.
    The evidence indicates that capacity cuts in steel and other commodities are not happening in reality; corporate borrowing continues to rise and that deleveraging is a myth.
    It also suggests the economy is not rebalancing towards services from manufacturing and China is not reflating in the sense of faster growth, although profits are up.
    “With the Communist Party Congress just weeks away, leadership can breathe easy,” CBB president Leland Miller and chief economist Derek Scissors said in the report.
    “The worry is not how the economy is faring now, but where it is headed. Beneath substantial accomplishments lies a potentially darker story for 2018.”
    CBB said in its previous report that China’s economy remained strong in the second quarter as the Communist Party sought to prevent any pain ahead of the congress.
    Policy support, a lack of shocks, and the looming political transition offered a best-case scenario for the economy, they said.
    Interest rates jumped and borrowing slipped in the second quarter, but that amounted to slower credit growth, not outright deleveraging, CBB said in the report.
    In the third quarter, companies borrowed at the second-highest rate in four years, as borrowing costs “nosedived nationally to accommodate”, CBB said.
    Corporate borrowing remains robust and deleveraging isn’t yet taking place, according to the report.
    “Deleveraging hasn’t gotten off the ground,” Miller and Scissors wrote. “The pain from any true deleveraging lies ahead. And that leaves 2018 hanging in the balance.”
    While China has said it is cutting excess capacity – which has boosted metals prices – CBB’s survey shows capacity expanded marginally in the third quarter after spiking in the April to June period. “Markets also need to be reminded that capacity cuts are only the first step,” they said. “The payoff is supposed to be lower output, which is nowhere in sight.”
    Labour force growth accelerated, with nearly half of the firms adding workers and almost none cutting jobs.
    That’s a positive before the congress because “if policymakers want to make sharp changes, wise or unwise, they can do so with less political risk,” the analysts said.
    Source: South China Morning Post

  • panther341

    well – with oil down, contango is gone and we are back to backwardation. LOL That didn’t take long – but has been the history with ups and downs in price. The Dec 2018 contract is most heavily traded 2018 contract and it is higher than Dec 2017. But only like 0.30 – not enough to pay for storage. 🙂

  • panther341

    and remember how Gartman was always buying or shorting gold in terms of other currencies? Causing someone on CNBC to say Gartman would buy gold in terms of Oreos if he could – one of my favorite lines ever! And Gartman actually started etfs to trade gold in terms of yen and Euros. That was 2014. Well here we are in 2017 and those funds are shutting down effective next week. https://finance.yahoo.com/news/advisorshares-announces-etf-closures-201500714.html I guess nobody was as enamored of that trade as Gartman. LOL