What Factor behind Surge in LME Copper Inventories, and What Impact on Copper Prices? SMM Reports

SHANGHAI, Aug. 23 (SMM) –LME copper inventories soared by 18,750 tonnes or 8.9 per cent to 229,375 tonnes on Aug. 22, the biggest increase since Jul. 6, LME data showed. 

The surge triggered market worries over copper consumption. Is soft demand blamed for the big rise in LME copper inventories? 

It is now a seasonally low-demand period for copper consumption, but load-out from domestic warehouses reports no significant declines compared with the high-demand period level, SMM learns. 

Meanwhile, subsidies for delivering goods to LME warehouses now leave no profit room for domestic smelters and traders.  

Hence, the surge in LME copper inventories is not because of weak demand in China, SMM copper analyst points out. 

What impact on copper prices after LME copper inventories grew? 

After the data release, LME copper dropped to $4,738 per tonne on Aug. 22, the lowest since Jul. 11.  

“Copper prices will be exposed to downward pressures again if LME copper inventories continue rising, but any downward room is expected to be small,” SMM predicts. 

Copper prices have been hovering at highs since July, a low-demand period, and chances are low for big declines with nearing of September and October, a peak demand period, SMM further explains.  

On the SHFE copper market, longs and shorts both take a cautious stance, as shown by positions holding, which will also not presage a big rise or fall. 

Moreover, downstream producers, which stayed out of the market as copper surged in July, are expected to enter the market after price declines, including those in the neighboring region of Hangzhou. 

Copper processing firms nearing Hangzhou have halted production for the upcoming G20 Summit to be held in early September, and their stock-piling after the summit will also support copper prices, SMM adds.  

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