Inventory drains set stage for more squeezes – TDS

Global inventory systems are fragmenting, and this is a nascent megatheme, TDS' Senior Commodity Strategist Daniel Ghali notes.

National security drives raw material hoarding

"Sec232 tariffs are wreaking havoc on copper markets, with the CME-LME 'arb' trading below 30% despite reiteration of an imminent 50% sectoral tariff on imports. Considering that less than 3% of the metal in LME warehouses are eligible to be delivered into the CME, this price action more likely reflects expectations of a diversion in flows which favours replenishing LME inventories."

"We think structural frictions will inhibit such flows. Themes ranging from silver's illusion of liquidity, the ongoing platinumsqueeze, and the historic squeeze on LME copper all share a common thread. Global inventories will remain tight as metal will flow out more easily than in. Hear me out: the West's critical minerals strategy is national security strategy."

"The ongoing competition for critical resources is leading to a silent bull market in critical metals that will persist as a result of these frictions. Sec232 tariffs lead to stockpiling of critical raw materials. Platinum, palladium, nickel and cobalt are vulnerable to subsequent investigations, and for many of these metals, global pools of inventories have already been bled dry."