Will Rising LME Copper Inventories Put Brakes on Copper Gains? SMM Reports

SHANGHAI, Jul. 7 (SMM) – LME copper inventories grew by 10,525 tonnes and 23,625 tonnes on Jul. 5 and 6, respectively, bringing total stocks up to 222,550 tonnes, the highest since Jun. 16. 

In early June, copper prices tumbled with rising LME copper inventories, and will the recent growth in LME copper inventories trigger stop the rising momentum on the copper market? 

“First, copper’s contango on the LME is widening now, and is expected to expand further as more inventories will flow into LME warehouses,” SMM copper analyst says. 

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It is reported that around 50,000 tonnes of copper left China for LME Asian warehouses, and the growth of LME copper inventories on Jul. 5 and 6 was part of those cargoes, so more will likely queue for LME warehousing, which will further expand the contango.  

On Jul. 5, the contango on the LME was $19.25 per tonne, and the market was in backwardation for a long time, and the surge of inventories in early Jun, up by nearly 60,000 tonnes, stopped the condition.  

Will copper prices stop rising after LME inventories surged?

“Currently, market fundamentals are not in good shape, and continuous increases on the LME and SHFE are likely to put the brakes on copper price gains,” SMM copper analyst foresees.  

According to SMM data, China produced 647,000 tonnes of refined copper in June, down 0.15 per cent month-on-month, but up 9.29 per cent year-on-year, with YTD output totaling 3.81 million tonnes, up 7.5 per cent. 

SMM expects China’s copper output for 2016 to grow by 5 per cent due to limited maintenance and high TCs.  

On the other hand, copper consumption in China’s domestic market is also disappointing, SMM survey finds.  

Survey of utilization rate at major copper downstream producers will be disclosed in SMM copper weekly report.  

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