Weakness has occurred in front-end time spreads for copper, said Barclays Capital in a commodity research note.
According to Barclays, the metal tumbled in recent days with other commodities on reduced expectations for further quantitative easing from the Federal Reserve. The spread for cash to three-months copper has narrowed down to $9 a metric ton backwardated from just above $30 at the start of the week.
“Part of the reason that spreads have weakened significantly in such a short timeframe is that the over past week or so, LME stock levels have offered the most significant reversal so far in 2012 in the trend of aggressive drawdowns which has been in place since the end of September last year,” the bank added.
From October until mid-March, London Metal Exchange stocks fell by 45%, or 214,000 tons.
“However, since troughing two weeks ago, LME stocks have now raised nearly 5Kt since mid-March.” Further, there are concerns about potential cathode exports from China over the next couple of months due to a currently oversupplied domestic market, Barclays concluded.
Source: Commodity Online