Copper boomlet deflates amid rising inventories

By Glenn Dyer | More Articles by Glenn Dyer

The boomlet in copper was again deflated on Tuesday, with London Metal Exchange prices and Comex futures prices in New York touching their lowest levels in seven weeks due to pressure from rising inventories and currency volatility. Three-month copper on the London Metal Exchange (LME) fell 2% to $US9,706 per tonne after hitting $US9,691, the lowest since April 23.

In New York, the Comex front month ended at $US4.51 a pound after touching a day’s low of $US4.425, the lowest since mid-April. Copper reached a record high of $US11,104.5 on May 20 in London and $US5.1999 a pound the same week in New York. The LME price is down around 12% since that peak, and the Comex price is down around 13% since its high.

Additionally, the LME copper market (and aluminum) is in a state of contango — that’s when the spot price trades at a discount to the three-month price on the LME. It is a sign of rising supplies and weak demand, and the stockpile position in London and Shanghai confirms this.

Copper inventories in warehouses monitored by the Shanghai Futures Exchange (SHFE) are at more than four-year highs, and copper spot premiums in China remain weak, with the Yangshan import premium in negative territory. (A positive premium is a sign of strong demand in China.)

Copper inventories in warehouses tracked by the Shanghai Futures Exchange were at 336,964 tonnes last Friday, the highest since March 2020 (at the start of the pandemic). Daily LME figures on Tuesday underlined the weakness, showing that total copper stocks in the LME-registered warehouses rose after 2,200 tonnes of inflows to 127,325 tonnes, the highest in more than three months.

"Base metals prices continue to come under pressure after having rallied sharply through May," Standard Chartered analyst Sudakshina Unnikrishnan said. "While copper benefits from a supportive medium- to longer-term market backdrop characterized by rising demand from the clean energy and renewable sectors and concerns over mine-supply growth, current demand indicators continue to look soft," Unnikrishnan said, Reuters reported.

Helping undermine the boomlet was the collapse of the BHP bid for Anglo American, which threatened to trigger more consolidation in the copper and base metals sector.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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