Wikinvest Wire

Chinese pig farmers hoard copper wire

Thursday, August 20, 2009

This story from Canada's Globe Investor offers yet another example of the unintended consequences of easy money policies, this time from mainland China.

Forget the sluggish U.S. economy. The biggest threat to the stunning rebound in base metal prices could come from Chinese pig farmers.

Easy access to credit from Chinese banks has apparently inspired hog producers in Guangzhou province, investing-astute citizens in Zhejiang province and residents of the northern scrap metal trading hub of Anxin county to speculate on the price of copper and nickel.

Regular Chinese citizens are mimicking the government's decision to aggressively stockpile metal supplies amid the global economic crisis.

According to a recent report by China Central Television (CCTV), residents in rural areas have been accumulating physical copper in recent months, in quantities ranging from a few tonnes to a few hundred tonnes.
How is this likely to end? Not well.

Though these new buyers are said to be "savvy investors", they are nonetheless highly leveraged speculators in one of the most volatile markets on the planet. They are likely to be the first to sell when prices make a big move down, as is likely to happen at some point in the months ahead as the Chinese government curtails its purchases after single-handedly causing the price of copper to double this year.


  © Blogger template Newspaper by 2008

Back to TOP