Copper consumers must feel giddy from this year’s roller coaster ride. Trying to predict when to buy has been a nightmare. Now we have a new question: What will the red metal do in 2008? The International Copper Group reports that the main engine of demand, China, will become a net exporter of metal in 2008 as new domestic production capacity comes on stream, reversing a significant demand for finished metal to one of additional supply to the world market. Following government efforts to cool the economy with tighter credit controls and the removal of export rebates, demand in China is forecast to rise by between five to seven percent next year, slowing from this year’s breathtaking 12 percent.

Copper inventories on the London Metal Exchange have increased 30 percent since the credit crunch hit the U.S. market in September, with the U.S. housing market showing no end to its 18 month decline. A similar story is unfolding in Europe. Copper demand is forecast to slow in these two important markets. The U.S. consumes 13 percent of world copper while Europe consumes a little less, but combined, they nearly equal China’s 20-30 percent. So if American and European economies continue to slow — and China becomes a net exporter — it won’t even take a recession to further depress copper prices. No wonder analysts are estimating $2.50/lb. for early next year, levels not seen since the beginning of 2007. The message for buyers is to keep price deals of short duration and monitor the markets to buy on dips. Volatility has been a feature of the market for the entire year, and we can expect that to continue in 2008. Most important of all, follow this blog for our thoughts on the market as the newest year unfolds!

–Stuart Burns

Chairman and Chief Executive Officer S. Claus narrowly avoided an angry crowd gathered at the headquarters of Christmas Entertainments Inc following reports of a catastrophic failure in their Global Supply Chain. In what was seen as a deliberate leak to the press just days before the news of the appointment of Aptium Global Inc, Strategic Sourcing consultants, turned a dramatic decline in the company’s share price into the largest one day rise since the company went public in 2005.

Reports had been growing for the previous few weeks that there were problems at the normally secretive Christmas Entertainments, suppliers of presents to the nation’s children on December 25 each year, due to supply side disruptions and component cost increases from their Asian suppliers. In an unprecedented move Lisa Reisman, Joint Managing Director and Strategic Sourcing guru spoke  from the beach  to reporters from the Cayman  Islands Scribbler where she was vacationing for the holiday period. “Normally client confidentiality prohibits us from going public in these situations but in this case the company has specifically asked us to reveal details of the work we have been doing over the last few months to illustrate that matters are under control. Changes in the Chinese VAT rebate structure back in the summer and rising metals costs have meant many of the company’s component suppliers have reneged on contracts causing severe problems in the supply chain. Following a thorough review we have instigated a policy of dual sourcing critical components, hedging against metal price fluctuations and outsourcing logistics to a 3PL, following the shipping delays in October caused by a severe bout of Reindeer Flu,” she said. (more…)

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