# China’s low copper inventory data belie sufficient supply Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-08-17 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: China's Low Copper Inventory Data: Reality vs Meta Description: Discover how low copper inventory data in China may not reflect actual supply, impacting copper prices and investor strategies. Get the latest insights now. URL: https://financedigest.com/chinas-low-copper-inventory-data-belie-sufficient-supplyhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-08-17t093635z1lynxmpej7g0bgrtroptp4china-nanfang-copper-1736813655606-compressed.jpg) By Mai Nguyen and Siyi Liu HANOI/BEIJING (Reuters) – Net long positions of copper on the London Metals Exchange (LME) are at a six-month high, partly fuelled by low Chinese copper inventories data, but industry sources say this signal often as seen as bullish isn’t reflecting the reality on the ground. China is the world’s top copper consumer, and combined inventory in the Shanghai Futures Exchange and Chinese bonded warehouses were 110,314 metric tonnes on Aug. 11, down 53% year-on-year and equivalent to just under three days of consumption. While futures [prices in London and Shanghai have fallen to multi-week lows, some investors have been building long positions, based on LME data, in anticipation that prices will turn higher in coming months because China’s](https://www.financedigest.com/oil-prices-wobble-on-worries-over-china-economy-us-rate-path.html "Oil prices wobble on worries over China economy, US rate path") inventories are so low, and on hopes the Chinese government will roll out more aggressive economic stimulus measures. The total net long position in LME copper rose to 9,488 contracts on Aug. 11, the [highest since](https://www.financedigest.com/russian-inflation-accelerates-to-7-61-m-m-in-march-highest-since-1999.html "Russian inflation accelerates to 7.61% m/m in March, highest since 1999") Feb. 10, data provided in the [Commitments of Traders Report](https://www.financedigest.com/euronext-delays-commitment-of-traders-report-until-further-notice.html "Euronext delays commitment of traders report until further notice") showed. With such limited inventory cover in China and on Western exchanges, we see significant right-tail risk to the copper price if, for example, there was a material [supply disruption](https://www.financedigest.com/oil-prices-rise-on-supply-disruption-jitters-as-geopolitical-tensions-grow.html "Oil prices rise on supply disruption jitters as geopolitical tensions grow") or upside surprise in China policy support announcements,” Goldman Sachs said in a report dated Aug. 11. Indeed, our dialogue with the [investment community](https://www.financedigest.com/community-giving-an-investment-that-really-matters.html "Community Giving: An Investment That Really Matters") so far in Q3 suggests interest in copper downside has now dissipated and buying copper dips is the predominant strategy. Traders and manufacturers, however, say there is enough readily available copper, and with demand hurt by a slowing economy, [supply might not become tight](https://www.financedigest.com/oil-rises-to-7-year-high-as-turkey-outage-adds-to-tight-supply-outlook.html "Oil rises to 7-year high as Turkey outage adds to tight supply outlook") anytime soon. In addition, the indicator may be particularly misleading now because more copper is now traded outside of the futures exchanges and directly between counterparties. Copper stock data is no longer important for us to assess [market supply and demand,”](https://www.financedigest.com/rare-neurodegenerative-disease-treatment-market-value-share-supply-demand-share-and-value-chain-2021-2031.html "Rare Neurodegenerative Disease Treatment Market Value Share, Supply Demand, share and Value Chain 2021-2031") said Zhang Kaimin, a purchasing manager at Hubei Shidai Refined Copper Technology, a copper rod maker that uses around 10,000 tonnes of refined copper a month. Spot supply is plentiful in the [market and it is easy to source material](https://www.financedigest.com/footwear-sole-material-market-to-expand-at-around4-5-cagr-during-the-2021-2031.html "Footwear Sole Material Market To Expand At Around4.5% CAGR During The 2021-2031") as long as you pay a good price,” said Zhang, who booked some cargoes in early August. Chinese copper [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks") readily available in the spot market, which includes stocks in warehouses of the Shanghai Futures Exchange, totalled 82,600 tonnes on Aug. 14, up 17.5% year-on-year, according to information provider SMM. However, Chinese bonded warehouse inventory, at 57,399 tonnes on Aug. 11, was down 70% from the same [time last year](https://www.financedigest.com/elon-musk-named-times-2021-person-of-the-year.html "Elon Musk named Time’s 2021 ‘Person of the Year’"), SMM data showed. Higher U.S. dollar financing cost, the exit of once copper trading giant Maike Group, and the troubled Chinese property sector all contributed to lower bonded inventory, said CRU analyst He Tianyu. Record high production by Chinese smelters [lifting operation rates and expanding capacity](https://www.financedigest.com/virgin-australia-says-high-staff-illness-rates-hampering-capacity-lifting-fares.html "Virgin Australia says high staff illness rates hampering capacity, lifting fares") also made up for the 12.7% year-on-year fall in refined imports in January-June. [China consumes more than half of the world’s](https://www.financedigest.com/world-shares-rally-as-china-offers-markets-a-hand.html "World shares rally as China offers markets a hand") refined copper, and demand usually peaks during the September-October autumn months as the property and manufacturing sectors ramp up. This year, the [outlook for both sectors is subdued in the slowing](https://www.financedigest.com/ks-cuts-2023-profit-outlook-on-slow-recovery-lower-potash-prices.html "K+S cuts 2023 profit outlook on slow recovery, lower potash prices") economy, which means the traditional uptick in demand during these three months might not be as robust. “Demand overall is subdued and copper exports are extremely sluggish,” said a Guangzhou-based copper product maker. Inventories also fell because many Chinese smelters recently invested more into manufacturing value-added products using some of their own refined metal, reducing the need to send supplies into warehouses, said a [copper tube](https://www.financedigest.com/innovative-apps-to-foster-the-growth-of-medical-copper-tubing-market.html "Innovative apps to foster the growth of Medical Copper Tubing Market") maker. There is also more [direct delivery between smelters and consumers](https://www.financedigest.com/direct-to-consumer-the-rite-of-passage-for-retail-in-2022.html "Direct to Consumer: the rite of passage for retail in 2022"), said the person, who declined to be named as they were not authorised to speak to the media. [“Low inventory is basically a normal market..](https://www.financedigest.com/low-calorie-toast-market-insights-deep-analysis-of-key-vendor-in-the-industry-2022-2031.html "Low-calorie Toast Market Insights, Deep Analysis of Key Vendor in the Industry 2022-2031"). and the [market liquidity](https://www.financedigest.com/liquid-smoke-market-growth-future-prospects-and-competitive-analysis-2022-to-2032.html "Liquid Smoke Market Growth, Future Prospects And Competitive Analysis 2022 to 2032") is not as good as before,” said another source at a copper smelter. Still, strong consumption from [sectors including electric vehicles](https://www.financedigest.com/the-electric-vehicle-sound-generator-market-to-create-turbulence-in-automotive-sector-at-a-cagr-of-14-between-2019-and-2029.html "The Electric Vehicle Sound Generator Market to create turbulence in automotive sector at a CAGR of 14% between 2019 and 2029"), solar and wind continue to support demand, analysts said, but the overall economic gloom must first lift for any significant pick up. The biggest risk will arise from China being unable to [stimulate growth](https://www.financedigest.com/bone-growth-stimulators-market-is-expected-to-earn-a-valuation-of-us-2-1-bn-by-2027.html "Bone Growth Stimulators Market is Expected to Earn a Valuation of ~US$ 2.1 Bn by 2027") significantly in the country from current levels,” said StoneX analyst Natalie Scott-Gray, forecasting an average LME copper price in 2023 at $8,748 per tonnes. (Reporting by Mai Nguyen in Hanoi and Siyi Liu in Beijing; editing by Miral Fahmy) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---