In the near term, I think it will pay to be more attentive to the macro picture and how sentiment in China is post Chinese New Year. At this stage most indicators are suggesting it will be weak.
One manifestation of the tighter than expected market for physical copper is the backwardation in prices between cash and 3 months. But at this stage its not really clear whether this has been bullish, as copper prices are currently no higher haven't since the curve became backwardated.
Supporting the resilient case is the fact that exchange stocks have fallen over the last month. This process does appear to have slowed in the later stages of the month though, with LME withdrawals slowing at the end of Jan and SHFE inventories rising. Comex stocks have also seen small gains, although are still incredibly low.
Their historical numbers do look a little low, with the inventory build likely much larger in 2009 and the destocking in 2011 more pronounced when prices approached $10,000t.
So with Chinese bonded warehouses stocks and exchange stocks lower, many are left wondering where the projected surplus is for 2013. This has left many more confident about this year.
I would be more cautious, particularly on the strength of Chinese consumption. Just because Chinese copper consumption was better than expected in 2013, doesn't mean that it will in 2014. Things like better announcements on grid spending are likely to be easily be overtaken by broader weakness generated by monetary tightening. Also at this stage, exports are not generating as much growth as would have previously been anticipated by strengthening OECD demand, in part due to the stronger real RMB.
