Copper Stockpiles Hit 21-Month High Amid Rare China Exports

(LME, China Customs)

(Bloomberg) -- Copper stockpiles jumped to the highest since October 2021 on the London Metal Exchange, underscoring soft spot demand in the Chinese market and beyond.

Inventories rose 2.3% to 195,475 tons on Wednesday, driven by deliveries into warehouses in Korea and Taiwan, which are the closest delivery points for metal flowing out of China.

The country is typically a massive importer of refined copper, but exports have jumped to record levels this year due to a rare mismatch between supply from China’s smelters and demand from its powerhouse manufacturing and construction sectors. 

The LME’s daily inventory data doesn’t show the origin of incoming shipments, but separate monthly reports from the exchange have shown that the volume of Chinese copper in LME warehouses has been rising steadily, contributing to a 90% surge in inventories since early May.

Stockpiles have also surged on the Shanghai Futures Exchange this year, and traders and analysts are increasingly alarmed that there’s been no meaningful drawdown in Chinese inventories over the past few months, when demand typically peaks. 

The rise in stockpiles has been one of the main headwinds during a sharp rise in copper prices this year, with investors looking past the signs of weak Chinese demand with bold bets that the market will tighten dramatically in the months and years ahead. 

The rally went into overdrive in May during a historic short squeeze on the US Comex exchange, where inventories have fallen sharply this year, bucking the broader global trend. The turmoil on Comex has sparked a global hunt for the handful of copper brands that can be delivered against its contracts, and the industry is waiting to see whether large-scale inflows will materialize in the coming weeks. There was a small increase on Tuesday, which lifted inventories from the lowest level since 2008.

Copper prices were 0.4% higher at $9,911 a ton on the London Metal Exchange as of 4:29 p.m. local time. Copper is up 15% this year, the best performer on the LME after tin.

--With assistance from Sana Pashankar.

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