Credit-Mad Chinese Companies

Source: Business Insider, Gus Lubin (5/5/11)

". . .are hoarding copper in a ponzi scheme for new loans?"

Business Insider, Gus Lubin

China still hasn't taken serious steps toward rebalancing and some areas of the economy are getting even more unbalanced, says Peking University's Guanghua School of Management Finance Professor Michael Pettis.

For instance, this ridiculous anecdote about copper-fueled ponzi schemes:

Since January I've been writing about—and trying to figure out—the strange happenings in China's copper market:

China had been importing for many months far more copper than was needed for real use. . .in spite of a huge surge in domestic infrastructure and real estate development, which has boosted copper demand. Imports continued even when London prices exceeded Shanghai prices by more than the equivalent of China's value-added tax (VAT).

Instead of being shipped to end users, it seems that copper was being stockpiled in warehouses. Why? One possibility was pure speculation. If you think China's domestic copper use will soar, and with it prices, it might make sense to buy and hoard copper. But there seemed to be more hoarding than normal. . .it turns out, that the copper purchases were not entirely, or even mainly, speculative. They were part of a financing scheme for companies that, despite the avalanche of new lending within and outside normal RMB lending, were having trouble accessing bank credit. . .it seems credit-starved companies were importing copper because they could obtain trade finance or some other sort of foreign financing, and then used the physical. . .as collateral for domestic borrowing. The financing was continually rolled over. Buying copper was just a way to borrow for companies that needed loans and were otherwise unable to get them.

That doesn't mean there isn't liquidity in China. There is tons of it, but much of the credit is being disintermediated because of constraints on bank lending.

US Ban of Russian Uranium Could Benefit Canadian Explorer
Source: Streetwise Reports (05/07/2024)

Vancouver-based Tisdale Clean Energy Corp. is watching a major development involving uranium in the United States with interest. Find out why one analyst calls it a "big deal."

Explorer Gets Conditional Approval for Chile Copper Project Deal
Source: Streetwise Reports (05/07/2024)

Canadian copper and gold explorer Vortex Metals Inc. says it has received conditional approval from the TSX Venture Exchange to acquire up to 80% interest in the Illapel copper project in Chile. Find out why two experts are recommending the stock.

Expert Says This Tiny Copper Stock Has Giant Upside.
Source: Clive Maund (05/06/2024)

Technical Analyst Clive Maund shares why he believes Giant Mining Corp. is an Immediate Speculative Buy.

Copper: The India Factor
Source: Michael Ballanger (05/06/2024)

Michael Ballanger of GGM Advisory Inc. shares how India's copper demand may impact the metal's price. Ballanger also reviews the gold and silver market, and shares one company he thinks might have a VMS project.