Warehouse monitoring for efficient metals markets

Geman, Helyette and Scheiber, M. (2018) Warehouse monitoring for efficient metals markets. Resources Policy , ISSN 0301-4207. (In Press)

Abstract

The goal of the paper is twofold: i) Exhibit the challenges posed to regulators by the monitoring of warehouses, after two major frauds took place in the metal markets in 2014 and 2017, and at a time when metals increasingly act as collateral in the activities of trade finance worldwide; ii) Demonstrate, using data of the Shanghai Futures Exchange copper inventories and forward curves, that a) both Exchange inventories and forward curves exhibited extremely abnormal moves at the time of the Qingdao fraud in June 2014 and b) the Theory of Storage of Working (1949) and Brennan (1958) remarkably discriminates between the Exchange inventories available for consumption at a given date of analysis, and the undocumented metals piled in ‘bonded warehouses’ coming to legal existence at some random future date. This finding may provide policy makers with a first avenue in the surveillance of metals markets.

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