Inventory Buildup Trend Persists Two Weeks After Chinese New Year; When Will Domestic Destocking Begin? [SMM Analysis]

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       Two weeks after the Chinese New Year, SMM copper cathode inventories continued to see inventory buildup, especially in the Shanghai region, where no signs of destocking were observed. Compared with historical years, SMM copper cathode inventories two weeks after the 2025 Chinese New Year increased by 115.68% from pre-holiday levels, marking the highest growth in nearly seven years.

       By regional inventory, SMM compared the total copper cathode inventories in Shanghai, Guangdong, Jiangsu, and the bonded zones in Shanghai and Guangdong. The Shanghai region saw the fastest growth and the largest inventory buildup, while the buildup in Guangdong slowed gradually, and Jiangsu followed the trend of Shanghai. Special attention was given to bonded zone inventories, as the export window recently showed signs of opening. Smelters may have export intentions, and some smelters signed deep-processing rollover long-term contracts with downstream buyers, transferring supplies to bonded zones, leading to a continuous increase in bonded zone inventories.

       After the Chinese New Year, copper prices continued to surge above 77,000 yuan/mt. The Contango price spread between futures contracts for SHFE copper expanded further, and spot copper remained at a discount amid high inventories and weak consumption. Spot traders were more inclined to convert spot cargo into warehouse warrants for delivery.

       Looking ahead, under the backdrop of high copper prices, although the operating rate of copper cathode rod producers increased to 74.25% this week, up 12.15 percentage points MoM, the raw material inventories of major enterprises also rose by 9.61% MoM. Copper prices are unlikely to fall back from highs in the short term. While the replenishment of imported supplies next week will be limited, the overall high number of warehouse warrants will continue to suppress spot premiums/discounts. Meanwhile, weak downstream cargo pick-up suggests that destocking is unlikely in February. Entering March, considering the reduced domestic supply replenishment due to smelter exports and maintenance, mainstream social warehouse inflows are expected to decrease MoM. With improving consumption, increased outflows from warehouses may provide an opportunity for destocking at the social level.

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