Inventory accumulation is almost entirely due to flows into the LME, while inventories in Shanghai have been reduced as traders make the most of the arbitrage window offered by premium pricing in China.
According to Capital Economics, this price gap has practically closed, while prices in London are falling.
“Looking ahead, we believe that copper inventories at both the LME and ShFE will continue to expand. China faces many headwinds to growth and we have revised down our forecast for copper GDP for many other copper-consuming regions, including Europe and the United States.
“Falling demand, coupled with our view that China’s refined copper production growth will remain solid, leads us to expect copper inventories on both exchanges to end the year higher than at the end of 2021. which will weigh on prices.”
