Chinese Copper Inventories’ 23.5% Drop Fuels Price Speculation, COMEX Copper Sinks 4.63%

Key Moments:

Inventory Drops Intensify Market Tightness

Shanghai Futures Exchange (ShFE) copper reserves declined for the second consecutive week, reflecting deepening supply tightness. According to market participants, this may lead to a spike in both prices and imports. On Wednesday, copper stocks hit 89,307 tons, a 23.5% decline from last Friday’s figures.

Last week’s plunge was even more dramatic, as it culminated in a 32% weekly drop to 116,753, which marked the largest percentage decline ever recorded. The reduction is being attributed to increased demand from domestic buyers who received metals purchased during a recent dip in prices.

Price Pressure and Import Premiums Rise

According to four traders who recently spoke with Reuters, the sharp inventory reduction could raise ShFE copper prices by tightening market conditions. They argued that although a complete depletion of stocks is considered unlikely, the reduced availability is likely to drive more metal into exchange warehouses.

China’s appetite for imported copper is already reflected in the rising Yangshan premium, which serves as a benchmark for demand. On Tuesday, the premium climbed to $94 per ton, 40% higher than the figure reported on January 2nd.

Global Market Impact and Supply Disruptions

Due to China’s approaching public holidays (May 1-5), Wednesday’s ShFE inventory data, which one trader had anticipated would show another 10,000-ton decrease, was released two days ahead of schedule.

Meanwhile, copper flows have been shifted toward the United States as trade tensions heightened the potential for tariffs on US imports. This shift contributed to the drawdown in Chinese inventories and has driven up prices on the COMEX exchange. Limited domestic supply and a curbing of US scrap metal imports has had a negative impact on Chinese consumers.

As a result, Tuesday’s copper inventory on COMEX soared to 137,759 metric tons, a climb unseen since December 2018. However, although COMEX copper futures managed to hit 4.9529 this week, Wednesday saw the benchmark suffer a notable slide of 4.63% to 4.6479.