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A surge in orders to remove copper from New Orleans stockpiles tracked by the London Metal Exchange may create the impression the market is tightening, according to Standard Bank Plc.
The orders, also known as canceled warrants, increased the most since June 11 overall, gaining 29 percent to 48,075 metric tons as 11,550 tons was earmarked for delivery in New Orleans, LME figures showed today. Copper bookings in the city climbed 44 percent to 37,875 tons, the highest level since March.
The jump “gives the impression that the copper market is tightening up,” Leon Westgate, a London-based analyst at Standard Bank, said in a report. “The LME is still the global reference price, and the cancellations may well impact on sentiment and therefore how the spreads behave.”
LME copper stockpiles, down 40 percent this year, may be unrepresentative of the metal’s availability given elevated inventories in China, Westgate wrote. Stocks monitored by the Shanghai Futures Exchange are the highest in more than five months. China is the biggest copper consumer, accounting for 41 percent of global demand, Barclays Plc estimates.
The bookings “look a little strange from the point of view of a potential customer” in light of waiting times required to withdraw metal in New Orleans, Westgate wrote. The copper earmarked for delivery may belong to the owner of the warehouse where it is held, and the cancellation will remove the metal from the market while putting it in line to benefit from a potential increase in premiums at the start of 2013, he wrote.
Withdrawing canceled metal from New Orleans may take as long as 30 weeks at the current minimum delivery rate of 3,000 tons a day, Bloomberg calculations show. The city holds 66 percent of LME zinc stockpiles.
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