SHANGHAI, Sept. 27 (SMM) –Copper prices both at home and abroad fell significantly last week, and copper inventories monitored by the Shanghai Future Exchange (SHFE) were also down sharply. Based on SHFE statistics, copper inventories were 102,253 mt in the week ended September 23rd, down 9,808 mt from the week ended September 16th, and a drop for a second straight week. There are rumors that domestic enterprises have consumed about 300 kt copper since the beginning of this year till present, and are likely to make stockpiling amid copper price declines. However, copper inventory drops in last week were not affected by this factor, since fewer enterprises choose to make stocks before a stable price trend is visible when markets are generally pessimistic towards the copper outlook.
SMM believes that the improvement in the SHFE/LME copper price ratio from LME and SHFE copper price declines was the main reason for copper inventory declines. According to SMM statistics, the price ratio increased from 7.42 on September 1st, to 7.60 on September 23rd, and to 7.77 when SHFE copper prices touched the downside limit. Therefore, SMM holds the view that significant drops in SHFE copper inventories actually reflected the fact that cargo-holders were eager to move goods for cash generation.