COMMENT: Where is the copper bear?

Where is the copper bear?

Cowering since the start of 2009, then cudgelled from June, the red bear has been knocked out of the ring so often that he may well be dead — lying under the vast pile of documents that forecast a deficit this year.

Concerns about global growth; the widening discount for scrap to primary; the 600,000 tonnes, or more, sitting in bonded warehouses in China; the poor uptake of ETFs; the end of the arbitrage into China; the use of copper for collateral not cable; weak physical premiums.

These are not bullish signs, but they are of scant succor to a bear who trades this market the same way as gets intimate with a porcupine: that is, very carefully.

When copper plunged to $6,300 per tonne in May, bearish traders bought calls at $7,000, $8,000, $9,000, $10,000, $11,000, $12,000.

When the market reached those strikes, the traders – bears to their bootstraps – went short against the calls.

The only concern was that a broker would go bust, or that the premiums on the $11,000 and $12,000 calls would be lost.

Those making the deals have been skeptical of the price of copper, which is a vehicle of speculation, but they are not bear trades.

There have only really been three trades in commodities in recent times: get long; get longer; take profit and get long or longer in more rapidly rising markets.

Though the bear is skeptical about the degree to which China, concerned about inflation and mindful of the uprisings in the Middle East and North Africa, can pull this market along at these levels, he is not a fool.

Investment money wants to buy commodities generically for a number of reasons that are well-rehearsed: the development of China; low interest rates; and asset diversification.

And there is an awful lot of that money about.

Still, sentiment has been moving the bear’s way, in recent days, not spurred directly by the issues mentioned above so much as by two pieces of bank research: a stirring commentary based on Standard Bank’s recent visit to China, and a considered reappraisal of its previous position by Goldman Sachs.

So shocking was the latter to one LME broker that he made noises about the irresponsibility of the bank modifying its bullish overlook.

Goldman Sachs is no bear. It still talks about cyclical tightness in copper.

But it is hard to believe that the more bearish noises of recent days will translate into much.

The markets can brush off disaster in Japan and the implosion of European economies.

It will take more than concerns about collateralised copper to reawaken the bear.