Soaring Copper Prices Send Crippling Shockwaves Across China’s Economy

Soaring Copper Prices Send Crippling Shockwaves Across China’s Economy

As if China didn’t have (soaring) debt, (shrinking) demographic and (pent up) default nightmares to struggle with every night (and realistically, every day) it can now add one more splitting headache to its rosters of economic challenges: soaring prices in the one commodity that is absolutely critical for China’s rapidly growing economy. Copper.

While commodity and copper bulls have enjoyed a tremendous start to the year with the price of copper surpassing $10K earlier this week and set to make new all time highs, Copper’s eyewatering price – which Goldman expects to keep rising for years due to an unprecedented supply/demand imbalance – is causing ripples of stress for industrial consumers in China, the world’s largest market for the metal. As Bloomberg reports, “some Chinese manufacturers of electric wire have idled units and delayed deliveries or even defaulted on bank loans, according to a survey by the Shanghai Metals Market.” Meanwhile, end-users such as power grids and property developers have also been pushing back delivery times, unable to pay for the metal, while producers of copper rods and pipes saw orders slump this week, said the researcher.

Copper’s rally – which is fueled by soaring global demand resulting from trillions in stimulus, near-zero interest rates and the global economic recovery from Covid-19 – sent the price above $10,000 a metric ton on Thursday for the first time in a decade, making it among the best performers in a scorching surge in metals prices.

“Domestic copper users are feeling the pain right now after the recent surge caught them off guard,” said Fan Rui, an analyst at Guoyuan Futures Co. “Electric wire producers are being hit the most, with smaller plants keeping run rates low as the spike is seen slowing the pace of investment by power grids.”

In a clear indication that the laws of supply and demand still work somewhere, as the price of copper exploded, Chinese spot purchases of copper have weakened significantly amid the copper rally…

… while the latest Chinese manufacturing PMI index slipped in April and the services sector also weakened, suggesting the economy is still recovering but at a slower pace. And while China – the biggest end user of physical copper may be approaching its demand limit  – analysts at banks including Goldman Sachs Group Inc. are predicting further gains for the metal as the global economy picks up pace.

To cynics who still remember Goldman’s $200 oil price target in the summer of 2008, Goldman’s copper euphoria is just a way to offload its own exposure to naive clients.

Sure enough, Bloomberg notes that in a sign of potential weakness in Chinese physical demand, the spot contract traded at a discount of as much as 215 yuan a ton ($33) to Shanghai futures’ prices this week, the widest in about 10 months. The appetite for imports is also low, with the Yangshan copper premium, paid on top of benchmark LME prices, slumped to the lowest since data were first published in 2017.

Furthermore, there is a precedent for demand destruction in China amid higher prices, according to BMO Capital Markets analyst Colin Hamilton. Hamilton pointed to 2006 where prices recorded the largest January-April gain on record and came amid a credit-fueled sudden acceleration in developed world demand.

“2006 was the only year this century where annual Chinese copper consumption fell on a y/y basis, as marginal buyers simply stepped away,” Hamilton said in a note, hinting that 2021 may be the second such year unless copper prices don’t stabilize.

Higher price levels also could see marginal buyers pull back in the near term and look to substitute in the medium term.

“$10,000/t copper now is the biggest danger to future demand use, particularly in these nascent trends where material selection is still evolving,” said Hamilton. “There is no doubt copper may be best for electrical or heat transfer performance, but with the ratio to aluminium now well above the 3.5:1 level where we consider substitution accelerates, the risk is clear.”

Copper fell 0.8% to $9,806 a ton on London Metal Exchange on Friday after reaching $10,008 on Thursday, the highest since February 2011. Aluminum also fell, while nickel rose.

While physical demand may be reaching its limits, the financial demand for copper remains strong as speculators – who never plan to accept physical delivery – keep pushing the price higher on the back of generous leverage and trillions in central bank liquidity. The question is when does this artificial push higher reach its limits, and will the upcoming crash in copper be similar to the plunge in oil in the late summer of 2008, when brent collapsed from $150 to $30 right around the time of the Great Lehman Delevearging.

Until then, we eagerly await for the new round of horror stories involving rehypothecated Chinese copper which as a reminder, is not only the most important commodity propping up China’s economy but also the key anchor behind hundreds of billions in Chinese Copper Financing Deals or CCFDs which we have discussed extensively in the past. One place we are closely watching is Chinese brokerage Dalu Futures which in late February amassed a $1 billion long position in copper contracts within just four days…

Tyler Durden
Fri, 04/30/2021 – 20:40

via ZeroHedge News Tyler Durden

“3 Or 4” Senators Will Run For President In 2024: McConnell

“3 Or 4” Senators Will Run For President In 2024: McConnell

Authored by Zachary Stieber via The Epoch Times,

Several current Republican senators will run for president in the next election cycle, Senate Republican Leader Mitch McConnell (R-Ky.) said on Thursday.

McConnell during a Fox News appearance responded to former President Donald Trump, a possible candidate who again criticized the longtime senator earlier in the day.

“We need good leadership. Mitch McConnell has not done a great job. I think they should change Mitch McConnell,” Trump said.

The relationship between the two Republicans has frayed for months.

McConnell responded by saying that Republicans are “looking in the future, not the past.”

He pointed to Sen. Tim Scott’s (R-S.C.) rebuttal to President Joe Biden’s speech on Wednesday night, saying Scott “is the future” of the GOP and laid out where the Republican Party has arrived.

Trump also said, “100 percent I’m thinking about running,” noting that he drew some 12 million more votes in the 2020 election than he received in 2016.

Then-President Donald Trump speaks to the media after signing a bill for border funding in the Oval Office at the White House in Washington on July 1, 2019. (Mark Wilson/Getty Images)

McConnell affirmed on Fox that he will back whomever voters choose as the GOP nominee in 2024.

“I’m going to support the nominee of the Republican Party,” McConnell said.

“I do predict, however, there’s going to be a robust competition for the nomination. I’ve got three or four members of the Senate who are going to be running for president in 2024, once that all sorts itself out, as the Republican leader of the Senate, obviously, I’ll be supporting the Republican nominee for president in 2024.”

McConnell did not name which senators he was referring to, but Sens. Josh Hawley (R-Mo.), Ben Sasse (R-Neb.), and Scott are among the rumored potential candidates.

Sens. Ted Cruz (R-Texas) and Marco Rubio (R-Fla.) are also considered possible candidates. Both ran in 2016.

Others who have been mentioned as potentially running on the Republican side include former U.S. ambassador to the United Nations Nikki Haley, Florida Gov. Ron DeSantis, and Maryland Gov. Larry Hogan.

Trump on Thursday said he is considering DeSantis as his running mate if he does run.

Tyler Durden
Fri, 04/30/2021 – 20:20

via ZeroHedge News Tyler Durden

No Recusal When Judge’s Ex-Clerk, Who Clerked While Case Was Pending, Now Works for a Law Firm in the Case

From a decision on April 21 by Judge James L. Robart (W.D. Wash) in Straw v. Avvo, Inc.:

Mr. Straw assert[s] claims against Defendant Avvo, Inc. … for defamation; tortious interference with prospective contractual relations; intentional infliction of emotional distress; and violations of Title II of the Americans with Disabilities Act. These claims arose from statements that Avvo published on Mr. Straw’s profile in a directory of lawyers on the website….

[T]he court granted Avvo’s motion to dismiss Mr. Straw’s amended complaint and granted Mr. Straw leave to amend. Straw filed his second amended complaint[, but] … the court granted Avvo’s motion to dismiss Mr. Straw’s second amended complaint—this time with prejudice and without leave to amend—because Mr. Straw did not address the deficiencies identified in the court’s prior order. Mr. Straw appealed the dismissal to the Ninth Circuit Court of Appeals. His appeal is still pending….

Mr. Straw … argues that recusal is necessary because Avvo’s law firm, Davis Wright Tremaine LLP (“DWT”), employs an attorney who formerly served as one of the undersigned’s law clerks while Mr. Straw’s case was pending in this court. He contends that “the existence of [the law clerk] on the roster of attorneys at DWT … favors the trial judge’s clerk, his firm, and that firm’s clients.” As a result, according to Mr. Straw, the undersigned violates his duty to be fair and impartial by continuing to preside over this case.

Mr. Straw asserts that because “Avvo has been wrong so severely in injuring [him] and with its false statements to courts and poor ethical judgment, taking data not allowed to be republished and publishing it to injure [him] over [his] objections, [he] want[s] a trial judge who has NO CONNECTION whatsoever to Avvo, its parent companies, or its lawyers.” If there is no such judge in this district, he asks that the Chief Judge of the Ninth Circuit “find someone who is unconnected and disinterested.” …

The undersigned declines to recuse … from this case. The fact that a former law clerk now works for a law firm that represents a party in a matter before the court does not, without more, provide a basis for recusal. See Omni Innovations LLC v. LP, No. C06-1129JCC, 2009 WL 3248084, at (W.D. Wash. Oct. 9, 2009) (“A rule barring former law clerks and externs, much less their entire law firms, from appearing in a particular court would be unreasonable and unjustified.”).

Moreover, the attorney to whom Mr. Straw refers in his motion did not work on Mr. Straw’s case while he served as a law clerk and, according to DWT, has not worked on Mr. Straw’s case since joining that firm. See Hussain v. Nevada Sys. of Higher Educ., 458 F. App’x 659, 662 (9th Cir. 2011) (affirming denial of motion to disqualify judge where defense counsel’s firm employed former law clerk and where former clerk did not work on case); see also Wash. R. Prof’l Conduct 1.12(a) (providing that a former judicial law clerk may not represent a party in a case in which the former clerk participated personally and substantially while employed as a clerk). Because the undersigned harbors no bias against Mr. Straw or in favor of Avvo or its attorneys, he declines to recuse himself ….

Under Western District of Washington local rules, the recusal question went to Chief Judge Ricardo S. Martinez, who on Tuesday likewise declined to require recusal:

After filing his appeal, Plaintiff sought to have Judge Robart voluntarily recuse himself from Plaintiff’s case in the event any further district court proceedings occur. Plaintiff bases his request upon his discovery that one of the more than 500 lawyers employed by Davis Wright Tremaine LLP (“DWT”), local counsel for Defendant, formerly clerked for Judge Robart. Plaintiff alleges that “[t]his was more than a little reason for the trial judge to favor [Defendant].” Due to Plaintiff’s prior experience in an unrelated Indiana action, he indicates that he has “a zero tolerance for such connections, such favoritism due to clerkships,” and that “[t]he existence of [a former clerk] on the roster of attorneys at DWT is enough” to make a judge impartial.

A “judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.” This includes circumstances where the judge has “a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding.” Recusal is appropriate if “a reasonable person with knowledge of all the facts would conclude that the judge’s impartiality might reasonably be questioned.” This is an objective inquiry concerned with whether there is the appearance of bias, not whether there is bias in fact.

Plaintiff has not set forth a basis upon which Judge Robart’s impartiality may reasonably be questioned. Plaintiff does not allege that Judge Robart’s former clerk has worked on this matter on behalf of Avvo. Plaintiff does not allege that Judge Robart’s former clerk has any information related to the case that is not in the public record. Plaintiff does not allege that any communication related to his case has occurred between Judge Robart and his former clerk.

Rather, Plaintiff speculates, without a factual basis, that Judge Robart will favor the clients of a large firm that now employs a single attorney who previously clerked for Judge Robart. Such speculation does not establish an objective basis to conclude that Judge Robart’s impartiality can reasonably be questioned.

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