TheChek News Flow

A rise in Chinese copper stocks to record levels has divided opinion, with analysts and traders at loggerheads over the reason for the increase.

Copper prices, which fell to a six-year low in January, have risen 12 per cent this quarter and briefly traded above $5,000 a tonne helped by a weaker US dollar and optimism over China’s property market.

But investors are trying to work out why there is 400,000 tonnes of copper worth more than $2bn sitting in warehouses monitored by the Shanghai Futures Exchange.

Analysts at some of the most influential banks in the commodity markets, such as Bank of America Merrill Lynch, say the stocks are a sign that demand in China, the world’s largest consumer of copper, remains weak.

Copper is seen as a key barometer for the health of China’s economy, due to its use in wiring, cables and construction.It is also key for the fortunes of some of the world’s largest global miners.

But many traders say the reason behind the build-up in stocks is more complicated and does not reflect weak demand. They note that most of the metal has not been warranted with the Shanghai exchange, meaning the metal is not backed by an official receipt.

They suggest the build-up has been driven by Chinese smelters, who have written derivative contracts as a way of generating cash amid weak copper prices. That has left them potentially exposed as the price has rebounded.

That could have encouraged them to deliver metal on to the exchange, to give the impression of weak demand and large stockpiles in the country and push the price back down.

Imports of copper concentrate — partly purified ore that is later smelted to produce refined metal — to China were also strong at the end of last year, which has left smelters with stocks of copper cathodes.

In the rest of the world, inventory trends are running in the opposite direction.

Copper stocks on the London Metal Exchange have dropped 38 per cent this year. On Tuesday, copper for three-month delivery on the London Metal Exchange was trading at $4,870 a tonne.

Some of that metal has made its way to China. Customs data show refined copper imports jumped sharply in the first two months of 2016, compared to the same period a year ago.

That flow of metal was driven by a difference in prices between Chinese domestic prices and the rest of the world — a window that has now closed.

“Metal arriving at port in China is now being deposited in bonded warehouses rather than brought onshore give the current unattractive import economics,” said Standard Chartered.

Stocks at bonded warehouses have risen to around 500,000 tonnes, taking total visible Chinese copper stocks close to 900,000 tonne — the highest since May 2014. That is causing concern among speculators who have turned increasing positive on copper.

Total long positions in copper — bets that the price will go up — are at levels not seen since July 2014, according to London-based broker Marex Spectron.

Two hedge fund “quants” have come up with an algorithm that diagnoses heart disease from MRI images, beating nearly 1,000 other teams in one of the most ambitious competitions in artificial intelligence.

Tencia Lee, who recently left Los Angeles-based Crabel Capital Management to join a robotics start-up, said she and partner Qi Liu of hedge fund Two Sigma had not previously worked before with the winning technology, called deep learning.

Ms Lee and Mr Qi entered the contest in December and created a method that has proved, in early tests, to be as effective as a cardiologist in analysing images of the heart.

“People have been working on this for 15 years — I’m amazed what kind of results came out of this competition in three months,” said Andrew Arai, chief of advanced cardiovascular imaging at the National Institutes of Health.

MRIs are used to diagnose heart disease around 1m times a year in the US, Mr Arai said, with cardiologists spending an average of 20 minutes on each image. That could make the algorithm an important addition to a growing field of automated medical imaging, though it faces stringent formal tests before it can be adopted.

The winning entry used a so-called convolutional neural network, a form of deep learning designed to emulate the way vision works in animals.

Ms Lee said that neither of the pair had worked with neural networks before and had taken software from GitHub, an online repository of open-source software, to solve the challenge. The main problem they faced had been to define the problem in a precise enough way, she added. After that, it was a question of feeding examples of heart MRIs into the neural network and letting it work out the solution.

The availability of such software meant that even complex problems were open to being solved by experts with a more general background in data science, Ms Lee said. “We are both very experienced with working with large amounts of data, and having an intuition about where to look for problems,” she said. “It took all my spare time over a period of three months.”

Recent technology advances are “allowing us to do things with images that were not possible three or four years ago”, said Anthony Goldbloom, chief executive of Kaggle, which ran the National Science Data Bowl competition with consultancy Booz Allen Hamilton.

A moving image showing the heart and the algorithm in action

The changes include development of specialised chips suited to pattern recognition, called graphical processing units, or GPUs, and big increases in computing capacity, he added.

Open competitions have become an increasingly common way to solve difficult data science problems. Netflix ran one of the most prominent in 2009 with a $1m competition to come up with an algorithm to make film recommendations.

Kaggle, which conducts about 50 competitions a year on behalf of big companies, said the heart imaging challenge was the hardest it had run. The chance of winning instant fame in their field, even more than the prize money, accounted for the large number of people who entered such contests, Mr Goldbloom said.

Sander Dieleman, a PhD student in neural networks who headed a team from the University of Ghent that won last year’s National Data Science Bowl, has since been hired by DeepMind, Google’s UK-based deep-learning arm whose system recently beat the top human champion at the board game Go.

Ms Lee and Mr Qi entered the competition individually and were placed in the top 10 after an early round. They teamed up after Mr Qi posted a message on Kaggle seeking help.

A union-backed board member at French energy company EDF has said he will vote against its plan to build a nuclear reactor at Hinkley Point in the UK.

Christian Taxil, who represents the CFE-CGC union, wrote in a letter to EDF staff, seen by the Financial Times, that conditions were “not right” for the £18bn project and it should be postponed.

The EDF board is expected to vote on the final investment decision on May 11. The project is critical to the UK’s energy future, set to provide 7 per cent of the nation’s electricity when it starts operating in 2025.

Mr Taxil wrote on Wednesday that the challenging financial position of EDF, technical issues and the current state of the energy market all meant that “conditions were not met” to push ahead.

This follows an FT report on Tuesday that senior engineers and other dissidents within EDF were calling for at least a two-year delay in the project and for a redesign of the reactor.

These were just the latest dissenting voices. Thomas Piquemal, the chief financial officer of EDF, resigned this month over concerns that the project could threaten the company’s future.

CFE-CGC had already come out against the project in its current form, last month saying that it could “put EDF in danger”.

A negative vote by Mr Taxil is unlikely to make a difference to the final vote, however. The unions only have six board seats and they are not united in opposition.

The majority of the 18-strong board is likely to vote in favour of the deal, according to people close to the group. The company is 85 per cent state owned and the government wants the project to go ahead.

Vincent de Rivaz, chief executive of UK division EDF Energy, last week said “clearly and categorically” that the Hinkley Point C plant would go ahead.

“Nobody knows where this will end,” Jacques Verdonck, Renault-Nissan’s manager in charge of the alliance since 2010, told Handelsblatt when asked if the symbolic 3.1-percent stake the two companies currently hold in each other could be increased.

Whether or not the stake is increased, Mr. Verdonck said the partnership has been far more successful than both sides had imagined and would be deepened in the coming years.

“There are no taboos,” he said, adding that ideas for additional cooperation are regularly being reviewed by both sides.

Among the new projects being considered is a collaboration on electric cars.

“Every car manufacturer is thinking about the next generation of e-cars, and that is a topic that we would handle in a partnership,” said Mr. Verdonck.

Thirteen joint projects are already running between the two carmakers, including joint development of Smart/Twingo compact cars and a joint factory venture in Mexico to build premium cars. The two chief executives, Carlos Ghosn of Renault-Nissan and Dieter Zetsche of Daimler, also meet once a month to discuss the cooperation.

Read the full story in Thursday’s Handelsblatt Global Edition at 12:00 CET.

Link: h{ttp://www.channelweb.co.uk/crn-uk/news-analysis/2452810/is-rackspace-dressing-the-bride-for-a-sale }