Copper margin increase just announced

[southfork]

There is no doubt they are intent on driving people into paper based investements and out of tangible assets.


BREAKING: CME Group Raises Copper Margins 15%

05 October 2011, 06:03 p.m.
By Kitco News
http://www.kitco.com/


(Kitco News) - Margins for Comex copper futures for the February 2012 contract and deferred months were hiked 15% by the CME Group, which will go into effect after the close of business Thursday, the exchange said Wednesday.

The new initial margin, or performance bond, is $7,763 per contract, up from $6,750 per contract for speculators and the new maintenance level is $5,750 per contract, up from $5,000.

For hedgers, the new initial margin and maintenance level is $5,750 per contract, up from $5,000.

The CME Group will raise margins based on contract volatility.

By Debbie Carlson of Kitco News dcarlson@kitco.co;

<<Back to more Kitco exclusive news

[andial]

They don't want people speculating long on the metals. Solution? Buy the physical.

[Strawboss]

Yeah, and supposedly the reason is to compensate for increased volatility, which is total BS as the margin requirements on XLF were just REDUCED over 30%. Its ok to speculate with margin on financials, but, not in commodities.

This is nothing more than organized crime.

[REO 54]

I posted this over on another thread:http://www.goldismoney2.com/showthre...bars-and-coins, it applies here as well...

Copper Rout Unlikely to Halt Chile’s $67 Billion Bet on Mines: Commodities.....

Chile, the world’s biggest copper- producing nation, expects mining companies to maintain their investment plans even after prices slumped by the most in three years and is seeing few signs of weaker Chinese demand.

Spending on new or existing mines will reach $67 billion over the next eight years, Mining Minister Hernan de Solminihac said in an interview in London yesterday. Codelco, the state- owned copper company, will account for $20 billion of the total. While there has been “some adjustment” in China’s imports, the change hasn’t been “significant,” the minister said.

Copper slumped 33 percent since reaching a record $10,190 a metric ton in February as mounting concern about growth eroded expectations for supply shortages. Goldman Sachs Group Inc., Barclays Capital and Standard Bank Plc cut their forecasts in the past week. Speculators in U.S. futures held their biggest bet on falling prices since July 2009 as of Sept. 20, Commodity Futures Trading Commission data show.

“The fundamentals don’t explain the decrease in the price,” said the 53-year-old minister. “Most of the price is because the people are looking at what is going on in the market, the international turbulence that we have, so they are kind of worried about the situation in Europe and the U.S., so they’re trying to be more careful. As soon as the economy stabilizes, there should be a rebound.”

Copper fell 29 percent to $6,800 this year on the London Metal Exchange, heading for its second-worst year in almost a quarter century. Prices dropped 54 percent in 2008. Futures traded on the Comex exchange in New York slumped 31 percent to $3.085 a pound, the worst performer in the Standard & Poor’s GSCI gauge of 24 commodities.

European Federation
That compares with a 19 percent decline in the MSCI All- Country World Index of equities and a 31 percent return for Treasuries maturing in 10 years or more, according to data compiled by Bloomberg and the European Federation of Financial Analysts Societies.

Consumers in China, the world’s biggest users, should take advantage of the slump in prices to restock, Codelco Chief Executive Officer Diego Hernandez said in an interview in London yesterday. Orders from Asia look “quite strong” for next year and clients in Europe are “cautious,” he said.

China imported 235,509 tons of copper in August, 21 percent more than in July and the most since January, customs data show. Stockpiles in warehouses monitored by the Shanghai Futures Exchange fell 45 percent since March.

Hernandez and the minister, who was appointed to the post in July, are in London for LME week. The annual event is attracting as many as 5,000 merchants to the British capital this year for talks on metals markets and supply contracts.

BHP Billiton

BHP Billiton Ltd., based in Melbourne, Anglo American Plc (AAL), Rio Tinto Group and Xstrata Plc are among the biggest foreign mining companies investing in Chile. BHP owns Escondida, the world’s biggest copper mine, while London-based Anglo and Zug, Switzerland-based Xstrata own Collahuasi, the third-largest.

Mining companies are basing their investment decisions on the assumption that copper will average $2.50 a pound or more in the long term, De Solminihac said. Chile has 8,000 mines, dominated by the copper industry.

Chile’s government is budgeting for an average copper price of $2.80 a pound this year and $3.02 in 2012, the minister said. The metal averaged $4.20 so far this year on Comex and no futures contract going out to 2015 is trading below the government’s 2012 target. Mining employs 200,000 people in Chile, accounts for 20 percent of the economy and 50 percent of exports, said De Solminihac, who has a doctorate in engineering.

Commodity Analysts
While Barclays cut its forecast for the shortfall in supply five times since April, the bank still anticipates a shortage of 468,000 tons this year and 153,000 tons in 2012, according to a Sept. 30 report. Copper will average a record $10,075 next year, the bank’s team of commodity analysts estimates.

Supply and demand may be in balance in about four years, potentially moving to a surplus by 2018, De Solminihac said.

Mining companies have struggled to keep pace with demand because of declining ore grades and rising costs. Ore grades averaged 0.76 percent copper content in 2009, compared with 0.9 percent in 2002, according to CRU, a London-based research company. That means one ton of rock contains 7.6 kilograms (16.8 pounds) of metal. Copper-mining costs rose 20 percent in Chile last year, UBS AG estimated in a report in May.

Goldman expects copper to reach $9,500 in 12 months, down from an earlier estimate of $11,000, according to a report yesterday. The bank cut its estimate for 2012 world growth to 3.5 percent from about 4 percent. That compares with the 5.2 percent contraction the World Bank estimates took place in 2009. Emerging markets can be “relatively resilient” to slowing developed economies, Goldman’s analysts wrote in the report.

New York

Copper demand shrank 0.9 percent in 2008, amid the worst global recession since World War II, Morgan Stanley estimates. Global stockpiles in warehouses monitored by exchanges in London, New York and Shanghai expanded 15 percent to 652,385 tons this year, about 50 percent more than the average over the past five years, data compiled by Bloomberg show.

Most of those gains were registered by the London Metal Exchange and Comex. China, which accounts for about 37 percent of global copper demand, will expand 9.3 percent this year, compared with 10.4 percent in 2010, according to the median of 10 economists’ estimates compiled by Bloomberg. U.S. growth will slow to 1.6 percent this year, from 3 percent in 2010, the estimates show.

China looks “quite confident to continue with current demand,” Codelco’s Hernandez said. “We don’t see them slowing down but of course it’s early days on this sales campaign.”

To contact the reporter on this story: Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net

[EO 11110]

piling on...

copper has been crushed

banksters going for max pain

[REO 54]

Stomaching the Copper Price: An Investment or a Warning?


Tying in nicely with the myriad reports of Financial Armageddon, the 14-month low copper price has giving fear-mongerers another empirical source to point at. The industrial metal with the apparent "PhD in Economics" has, like many individuals with so-called doctorate titles in the aforementioned field, clearly disappointed.

Amid global uncertainty, the Cu debate rages. The Chief Executive of the world's top copper producer, Chile's Codelco, said "we have concerns because the world doesn't look too well, especially Europe. But we're quite optimistic for the supply and demand for copper." Yet the CME Group took the opposite approach and raised collateral requirements for copper futures for two consecutive weeks, totalling more than 30%. This "manipulation" has, just like it constantly does to silver and gold, shaken out the over-leveraged investors and applied more downward pressure on the red metal's price. And meanwhile, Goldman Sachs lowered its copper price forecasts for 2012, as did Standard & Poor's.

So . . . the good news? The metal's recent volatility, a result of an increasingly unstable global economy and stalling growth, may spell death for weak explorers and producers, leading to cancelled projects and future shortages in the copper supply. This presents an enticing long-term strategy: go long on the strong copper explorers and producers now, while shares are on sale at a 30-50% discount from 2011 highs.

Unfortunately, Chile's state-owned Codelco is not up for sale, though investors can choose from a range of junior, mid-tier and major producers that deal either solely with copper or with a combination of copper-silver-gold. Two companies we have recently covered and continue to watch include: Copper One [CUO - TSX], which is an exploration company with properties in Quebec , Arizona and New Mexico (Having recently started drilling at its Lone Mountain property in New Mexico, we will soon see how the company delivers in this sought-after region.); and Copper Mountain [CUM - TSX], which has now become a new Canadian producer, aiming to churn out 47.6 million kg of copper per year for the next 12 years.

As it takes considerable time and money to put copper mines into production, investors will need a strong nerve to follow this metal. For instance, shares in copper miners Freeport McMoRan Copper & Gold and Ivanhoe Mining recently fell to 50% from their previous highs. Ivanhoe, which is currently developing the world's largest copper-gold project in Mongolia, is not immune from the market mayhem.

With copper down more than 30% for the year, the commodity is now in the gray zone of turning into a falling knife or bottoming out. Bulls say that continued demand from China, expected to increase around 5% next year, will keep the price up; bears say hedge fund traders will continue to short the metal as its price is still above the mining cost. I say look to China, the country that consumes 40% of the red metal, and look to the upcoming economic storm. At the moment, stable copper miners are a bargain. The challenge is knowing where the bottom is and when, not if, the rebound occurs.

With a love of dirt and a knack with solid words, Chris Devauld brings a sturdy core to the Prospecting Journal's writing team.

Son of a self-made resources man, resident of a small BC mining town, world-traveller and writer of everything, Mr Devauld entered the working world labouring in the northern mines, forests and mills that have built Canada's economy. Currently a communications professional in Vancouver and an avid writer, his approach to mining is based on a strong education and diverse life experiences.

Having obtained a B.A. in English and Writing from the University of Victoria in 2006 and an M.A. in Communications from Edith Cowan University in Australia in 2009, Mr. Devauld sprinkled his inter and post education years with solid work in various sectors. He was a lead writer for a national charity in Toronto, specializing in social media marketing and outreach. He took a turn up in BC's Caribou Interior as a community journalist, finding the voice that resonates with BC's resource-based residents. And in 2009 - 2010 he worked for the High Commission of Canada in Australia as a communications expert and speech writer for the High Commissioner, assisting top diplomats with high-priority multinational business deals, such as BHP's failed bid for Canada's Potash Corp.

Mr. Devauld moved to Vancouver in early 2011 to establish himself in Canada's mining sector and apply his vast knowledge to all things precious, petroleum-based and rare. On top of ongoing contract work for the Canadian, Australian and New Zealand business interests in Vancouver, he maintains strong ties in Investor Relations and obsessively follows market news. His natural writing and deep-digging story mentality make him an invaluable member of the team and a lead explorer for our readers.

prospectingjournal.com

[Lugnutzpop]

piling on...

copper has been crushed

banksters going for max pain

No kidding. I have almost 300lbs of scrap copper I was planning on taking in last Saturday. Called the scrap yard first and found out prices had dropped almost $1.50/lb in the last 3-4 weeks. This news isn't going to help.

-L

[EO 11110]

No kidding. I have almost 300lbs of scrap copper I was planning on taking in last Saturday. Called the scrap yard first and found out prices had dropped almost $1.50/lb in the last 3-4 weeks. This news isn't going to help.

-L

maybe wait for the next batch of qe insanity and green shoots?

[Lugnutzpop]

maybe wait for the next batch of qe insanity and green shoots?

Speaking of QE, I received this little gem Tuesday as part of an e-mail newsletter I subscribe to. From Agora Financial....

Welcome to the new bear market. What little good QE2 accomplished has now vaporized.

Shortly after the open this morning, the S&P 500 dipped to 1,087 - 20% lower than the April 29 high of 1,363, thus meeting the formal definition of a "bear market." That much you've likely already heard if you were unfortunate enough to turn on your radio or TV.

Here's what you likely haven't heard: 1,087 is only spitting distance from 1,049 - the level of the S&P on Aug. 26, 2010. That was the day Fed chief Ben Bernanke delivered his annual speech in Jackson Hole, Wyo., and signaled that a second round of "quantitative easing" was in the bag.

The market's performance since then has been Bernanke's benchmark. Something to brag on. A point of pride...

Nov. 4, 2010: "Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action," he wrote in The Washington Post the day after QE2 was made formal policy
Jan. 13, 2011: "Our policies," he said at an FDIC forum on small business, "have contributed to a stronger stock market, just as they did in March of 2009, when we did the last iteration [of quantitative easing]. The S&P 500 is up about 20% plus and the Russell 2000 is up 30% plus."

Indeed it was. It is no more.


So,... the plan is now to hold on to the copper. I've been adding to the pile for about 2 months now, so no biggie. On the plus side, just received a skid full of old pumps and motors to be tossed. Should yield another 100lbs of copper or so after we take the stators apart.


-L