The copper market is confusing

The price of copper has dropped 12% year-to-date. The reason given is that the market is in surplus because of weakness in China, mainly.

And yet, according to an article in the FT this morning, there are contradictory facts:

1. Chinese demand for copper is currently "extremely strong," according to Tilis Mistakidis, head of copper for Glencore. Demand in China was up 16% year-over in the the three months ending in October.

2. Copper stocks in Shanghai, London and Chicago are at the lowest levels since 2008.

3. Copper production is expected to drop in 2015 due to declining grades at Escondida, the world's largest copper mine, and mine rehabilitation elsewhere.

4. Analysts who had been forecasting a surplus in 2015 have been cutting their surplus estimates.

Strong demand. Low stockpiles. Declining output. Lower copper prices. It doesn't make sense . . . unless a severe global economic slowdown is in the offing. But is it?

I don't see an objective reason why the economy should be worse next year than this. Mental gloom, however, could conceivably produce a depression were it intense enough, just as high animal spirits could produce a boom, were they present. "The mind is its own place and in itself, can make a Heaven of Hell, a Hell of Heaven." (Words of Satan in Milton's Paradise Lost)

So will we be in for Heaven or are we heading for Hell?