Warehouse Copper Inventories at London Metal Exchange drop further

UNITED KINGDOM July 01 2014 12:35 PM

LONDON (Scrap Register): London Metal Exchange copper warehouse inventories have continued to decline, although cancelled warrants suggest the pace may slow in the future, said Citi Research.

LME copper stocks were drawn down another 3,900 metric tons over the last week, taking them to 154,675. Draws over the first half of the year in LME inventory have totaled 211,750 MT,” Citi added.

Continued draws, a full four weeks into the ongoing Qingdao port investigation into multiple collateralization of metals inventory, appears to belie fears that the investigation would prompt significant deliveries of copper into the LME.

However, underlying the outright tonnage trend has been a reversal in cancelled warrant trends. Cancelled warrants represent metal that is effectively no longer available to the wider market, but is essentially earmarked for out loading.

As of June 30th, cancelled LME copper warrants stood at just 29,475 MT, the lowest level since mid-March 2013, and equivalent to only 19% of total LME copper inventory.

To put this into context, at the end of January, cancelled LME copper warrants accounted for over 60% of copper in LME-monitored sheds.

“The change has essentially been focused in New Orleans, where cancelled warrants -- as a percentage of totals in that location - have fallen from 40% at the end of May to 11% this month on the re-warranting of 27,250 MT of copper during June,” the firm added.

“A falling percentage of cancelled warrants can be interpreted as an indication that the future rate of LME draws will slow going forward,” Citi added.