Key Moments
- TD Securities’ Daniel Ghali highlights that copper will increasingly need to be sourced from exchange warehouses as global supply deficits intensify.
- Visible exchange inventories have risen to roughly 33% of above-ground copper stocks, compared with 5% at year-end 2023.
- A significant share of the remaining 67% of above-ground copper is described as encumbered by China’s strategic reserves, minimum working inventories, and landlocked US metal.
Shift Toward Exchange Warehouses
TD Securities’ Daniel Ghali argues that copper market dynamics are entering a new phase in which exchange warehouses are poised to play a much larger role in balancing supply and demand. He emphasizes that copper will increasingly need to be drawn from these visible inventories as global deficits exert pressure on the market.
Ghali contrasts the current situation with prior years, when traders could depend on plentiful off-exchange inventories to absorb imbalances. That backdrop has changed materially, according to his assessment.
From Last-Resort Venue to Central Stockpile
“As at year-end 2023, exchange inventories only represented 5% of global above-ground copper, reflecting the fact that exchange warehouses are a venue of last resort. Today, we argue that is no longer the case, with roughly 33% of the above-ground stockpile sitting visibly in exchanges.”
This marked increase in the share of visible inventories underscores a structural shift in how and where copper stocks are held. What had previously been a marginal, last-resort source of supply has become a significant portion of accessible metal.
Constraints on Remaining Copper Stocks
Ghali highlights that the majority of copper outside of exchange warehouses is not freely available to meet market needs.
“The rub: a large portion of the remaining 67% is now mostly encumbered by either (1) China’s Strategic Reserve Bureau, (2) minimum working inventory levels, and (3) landlocked US inventories.”
This encumbrance effectively limits the pool of copper that can be mobilized quickly, leaving visible exchange inventories as a primary buffer against tightening fundamentals.
Implications for a Developing Copper Crunch
“Copper stocks will increasingly drain from exchange warehouses from this point forward. For years, copper traders could rely on abundant off-exchange inventories to quell any supply/demand imbalance.”
“A global deficit will increasingly have to pull stocks from visible warehouses, reinforcing our view for a copper crunch.”
Exchange vs. Total Above-Ground Inventories
| Metric | Detail |
|---|---|
| Exchange share of above-ground copper at year-end 2023 | 5% |
| Current visible exchange share of above-ground copper | Approximately 33% |
| Remaining above-ground copper | Approximately 67%, largely encumbered |
| Key encumbrance factors | China’s Strategic Reserve Bureau, minimum working inventory levels, landlocked US inventories |
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