SHANGHAI, Feb. 25 (SMM) – Copper inventories at SHFE-registered warehouses more than doubled since the end of last August, according to data, leaving more metal than stockpiles in LME warehouses. How will the change affect copper prices both in Shanghai and London?
“There is no doubt that record high copper stockpiles on the SHFE will be negative to domestic copper prices, but the negative impact will be offset by expectations over upcoming peak-demand season,” said Jing Chuan, deputy general manager of Zhongda Futures.
Another analyst from Dayou Futures also pointed out that prices for copper forward-delivery contracts on the SHFE are now higher than those for near-term contracts, a reflection of optimistic outlook for peak-demand season, in addition to positive impact from China’s easing policies.
“Any downward pressure on domestic copper prices will be small, and buying activities during the upcoming high-demand period will help ease supply pressures,” said an analyst from Soochow Futures.
The analyst explained that current conditions bore some similarity to conditions in early 2014, when copper stockpiles were about 70,000 tonnes lower than current levels. Market pessimism out of high inventories depressed imports amid the sluggish SHFE/LME copper price ratio, and later prices rallied, with spot prices briefly reaching above 1,000 yuan per tonne.
“This year will see ample supply, so price gains in the peak demand season will not be big,” the analyst adds.
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