Hey Frank chew on this pal....

Note the rising level of copper exchange inventory on the LME over the past seven months?  Since the beginning of October 2012, LME copper inventories have increased by ~390,000 tonnes to 609,000 tonnes. Highlight below are several factors affecting this increase.

  • It's believed a large component of the increase is a redirection of inventory held by consumers, producers, merchants and traders to the LME from their own inventory, as opposed to a decline in end demand.
  • Copper premiums in Europe are approaching all-time highs of US$125/tonne (US$0.06/lb). These Premiums represent the charge that must be paid above the quoted LME copper price in order to secure metal for immediate delivery. Discussions in the copper market suggest that up to 50–60% of copper held in LME ware houses is not available for immediate delivery as the inventory is tied up in financing deals.
  • Several LME copper warehouses (Belgium and Malaysia) are offering incentives that are near all-time highs to attract copper into their individual warehouses. Note that there are 26 LME warehouses worldwide, and each is operated as an individual franchise. The incentives provide a financial impetus for any holder of copper to ‘dump’ that material into an LME warehouse.
  • Approximately 65%, or 247,000 tonnes, of the 390,000-tonne increase in LME copper inventory since October 2012 was registered in only two of the 26 LME warehouses worldwide—in Belgium (+125,000 tonnes) and New Orleans (+122,000 tonnes),  At least one of these warehouses (Belgium) is providing high incentives to attract copper.
  • One theme of discussion in the copper market is that the increase in LME copper inventory may have peaked. To substantiate this view, market watchers have noted a decline in the level of domestic copper inventories in China. In particular, copper in bonded warehouses(not visible) is thought to have declined by 100,000 tonnes to 600,000–700,000 tonnes since the end of February 2013. In addition, copper in Shanghai Exchange warehouses (visible) declined by 19,000 tonnes (7.7%) to 228,290 tonnes  last week, the first substantive decline so far during 2013. These two measures of the physical market will be monitored very closely over the coming several weeks as the copper market continues to review real demand in China

*   The large increase in LME copper inventory since October 2012 is more a reflection of reallocated metal drawn      into visible warehouses by economic incentives as opposed to a decline in end demand.

Things can and do change very quickly  like the 2nd largest Cu Mine in the US getting shut down only 1.4% of the world's annual production you say?