1) Several key industrial commodities like crude oil and base metals saw 100-200% gains over the last year. However, inventories of these commodities are piling up quickly in warehouses. 2) Demand for distillates and crude oil in the US remains well below last year's levels, contributing to growing stockpiles. Demand is also lower than average in OECD countries despite a cold winter. 3) While China's fuel demand is growing, effective demand for base metals, adjusted for rising stockpiles, appears weak even in China according to inventory levels. Rising stockpiles suggest the divergence between reported oil and base metals demand may not reflect economic reality.

1. INDUSTRIAL COMMODTIES:- IT MUST BE REALLY DIFFERENT
THIS TIME….
Over the last twelve months we had some 100-200% gain in key industrial commodities
like crude oil and its derivatives and base metals. I would not bore you with any post
mortem analysis as to why it happened, you must have been already inundated with that
information. Rather I would like to draw your attention to a few key issues:
1) If EMs, lead by China and partially supported by rest of the world have kept the
demand for such industrials alive and kicking, why is so much of inventory pilling
up thick and fast in various warehouses of LME and SHFE or tank firms in US?
2) Inspite of such a brutal winter, demand for distillates in US is still well below last
year, and as a result stockpiles are above 5 year average. Import demand for crude
oil is heading south and is a good 10 below last year average. Same story for
gasoline in the US.
3) IN OECD inspite of a very cold winter, demand for oil lead by winter fuels is way
below average. Stock piles are accumulating.
4) China is showing strong demand growth in fuel but I am surprised as to the
divergent trend between effective demand for base metals and published demand
for oil. By effective demand, I mean adjusting consumption with stockpiling.
With stockpiles accumulating in LME and SHFE, even without considering non-
exchange warehouses, I can safely say that effective demand is weak for base
metals, even in China.
Alas, I don’t have the stock pile figures for oil and oil derivatives or even
petchem in China and Asia, because I can safely assume that it would have shown
similar trend like metals. The reason I say so because a divergent trend amongst
industrial commodities can not exist because they are all indicators of the same
economic condition.
When I read reports and analysis I see little attention being paid to this fast rising
stockpile issue, as if to say, that the world has found out a new way of analyzing
commodity fundamentals. I beg to differ, mainstream analysis has always been about
fitting the news to the existing trend, that’s how the famous phrase is born, time and
again” IT’S DIFFERENT THIS TIME”…. But sadly its never…..
Regards,
Anindya Banerjee-
mailto:anindya1979@gmail.com

8. SHANGHAI BASE METALS INVENTORY CHANGE