The copper market has been in the doldrums since the start of the year, with prices stuck in a tight trading band and volumes and open interest falling on all three major global exchanges.
Doctor Copper is a nickname given to the metal because its price is often seen as a barometer of the health of the world economy. Investors seem to have fallen out of love with copper since October, when the London Metal Exchange intervened because of high premiums for the metal amid low inventories.
The metal premium on the London Metal Exchange (LME) remains, creating more regulatory uncertainty for the market.
Analysts widely believe copper prices will weaken this year as growth momentum in China, the world's largest copper consumer, slows.
Even bears, however, are worried that another rally could come before then, amid continued supply chain disruptions and inventory drawdowns.
This caution is justified because London Metal Exchange (LME) copper stocks are slowly falling again, leading to an ultra-low inventory premium last year.
Tuesday's LME inventory report showed only slight changes in copper stocks on the exchange. Overall stocks fell 100 tonnes to 79,925 tonnes, with an inflow of 1,400 tonnes in Hamburg offset by order withdrawals.
More interestingly, Rotterdam once again cancelled the 2,500 ton offer.
That's a magic number for the copper market.
On the first three days, Rotterdam cancelled exactly the same amount. In fact, this is the twelfth time since mid-January that the Dutch port has cancelled an order of 2,500 tonnes.
The only copper trade in Rotterdam that has not been cancelled is the transfer of stocks to Hamburg at a rate of 2,500 tonnes a day.
Several other London Metal Exchange warehouses are also taking action, but it is this cancellation of orders for European copper stocks that is weighing on the tight situation.
London Metal Exchange copper stocks have reversed early year gains and are now down 10 per cent in early January. Copper inventories have fallen to 53,600 tonnes, the lowest level since November.
That is still some way off the extremely low 14,150 tonnes recorded in October, when a liquidity squeeze sent LME backwardation soaring to an unprecedented $1103.50 a tonne.
The recent pattern of order cancellations echoes that seen before the Price chaos in October, with only a drop in inventory withdrawals from 10,000 tonnes a day to 2,500 tonnes.
Low inventories are not just a feature of the London market. Heading into the Lunar New Year holiday, stocks at the Shanghai Futures Exchange (ShFE) fell by 40,359 tonnes.
Copper stocks on the LME, ShFE and CME stood at 200,402 tonnes at the end of January. Last year it fell by 73,000 tons, the fourth consecutive year of decline.
In the first 11 months of 2021, LME deliveries fell by 115,000 tonnes. Total tonnage stood at 18,945 tonnes at the end of November, the lowest level since the exchange first published monthly data in February 2020.
The depletion of global reserves points to strong demand, especially from China, where imports remain strong.
However, if the loss of physical inventory is at least partly due to supply chain hoarding, optics may not be as rosy as it seems.
Trafigura admits it was one of the participants in last year's LME inventory liquidation, but it will not be alone in wanting to ensure it has enough stock to meet customer demand as the world remains in the grip of a shipping and logistics crisis.
As many consumers have experienced during the coronavirus lockdown, a lack of stock can trigger a scramble for leftover items, whether it's toilet paper or bottled water or copper. LME copper feels like it's about to experience a second shock.
