SHANGHAI, Feb. 20 (SMM) - Copper inventories on the SHFE and COMEX added 89.4% and 23.68%, respectively as of the week ending February 10 from early 2017. LME copper inventories decreased 22.97% during this period. Total inventories in the three bourses increased 13.85%.

Copper inventories on both LME and SHFE grew in December 2016 due mainly to release of invisible inventories, SMM said.

LME copper inventories began to drop from late December, while those on the SHFE and COMEX reported continuous growth. This means overseas copper inventories flowed into China.

“Maybe some importers overestimated domestic demand, which precipitated copper inflows to China’s warehouses,” Capital Economics Chief Commodity Economist Caroline Bain said.

SHZQ Futures’ Luo Liang said the copper inflows are due to market expectations of demand from domestic infrastructure construction this year. The closing of import window left copper inventories from the LME in the bonded zone. SHFE copper inventories are on the rise. Maybe some invisible inventories will flow into the SHFE at high copper prices.

The growth in total inventories on the three bourses also reflects demand is weaker than expected, especially in China. Copper inventories in China’s bonded zone returned to above 550,000 tonnes.

LME copper inventories showed no noticeable change. Contango on the LME and low premiums in China’s bonded zone mean copper supply is sufficient. Significant change in canceled warrants shows capitals dominating the market, said Zhao Weiwei from China Investment Futures.

Some analysts said recent change in copper inventories is normal, which is similar with the same period of last year. SHFE copper inventories increased 47% while LME copper inventories fell 12% during January 8 and February 19, 2016.

SOOCHOW Futures’ Zhang Huawei considers inventory growth caused by seasonal factor is at rational level compared to years past.

As to future change in SHFE copper inventories, Everbright Futures Metal Chief Research Officer Xu Maili sees declines with increasing operating rates at downstream producers and nearing of the high-demand season. Zhang Huawei said the inflection point of inventories may come earlier as the Chinese New Year holiday for 2017 is earlier than last year’s.

Most analysts reckon the growth in COMEX copper inventories is because of US domestic delivery in preparation for Trump’s stimulus policy. So this has no significant meaning for copper market.

Will the transfer in copper inventories affect copper prices?

According to statistics by First Futures, it is mainly because of stockpiling for the high-demand season when copper inventories grow at both SHFE and bonded zone and LME copper inventories fall. This will drive up copper prices, and vice versa. But weather recent surge in inventories will be consumed by downstream buyers is still uncertain.

SMM attributes the recent transfer in copper inventories to seasonal factor. Current SHFE copper inventories are still below the level in early 2016. SHFE copper inventories may increase further since downstream demand will not completely improve in the near term.

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