Double-Edged Copper Sword

There are a number of reasons that could be the cause but the two most probable is either China has found another source or their economy is about to tank within 2 years.

Oct. 26 (Bloomberg) -- China's refined copper imports, the world's biggest, may drop next year as domestic production increases, Beijing Antaike Information Development Co. said.

The official word it is an increase in domestic production.

Imports may total 1.35 million tons, from an estimated 1.46 million tons this year, as domestic production increases to 3.8 million tons from an estimated 3.4 million tons, Shen Haihua, general manager of Shanghai Maike Dickson Investment Management Co., a unit of the Maike Group, said Oct. 24.

Why is this an important piece of news, well I have always held copper prices to be a good economic predictor. When copper prices start to drop, a recession is the making. There is a short term boom as manufacturing cost drop due to lower copper prices. As mining companies make less money, they tend to spend less money and cut costs. Cutting costs generally include temporary shutting down or curtailing less efficient operations which is code for lay-offs. Unemployment rises, wage demand decreases and thus is born a recession. The recession continues until surplus copper is eaten up and prices start to rise again. It all goes back to supply and demand and the current fact of copper being an economic building block. If this move by China drives down copper prices look for some harder time.