LONDON – A wave of copper is currently washing up in London Metal Exchange (LME) warehouses. Arrivals of metal have totaled 73,325 tonnes this week, lifting headline exchange inventory to 271,575 tonnes, the highest level since October last year.
There’s no big mystery as to where this metal is coming from. Surging arrivals at LME sheds in Singapore and South Korea have broadly corresponded to export flows out of China. And in part this is no more than a continuation of the stocks rebalancing that has been playing out for several months, a refilling of a depleted LME system from high inventories in China that accumulated earlier this year.
But unlike the mini surge of LME arrivals in early June, there is no obvious bull-bear battle being waged across the front part of the London copper curve. If no-one is being forced to deliver metal against a short position, the alternative explanation would be that this is China pushing out surplus.
If so, it would mean that copper oversupply, already clear to see at the raw materials stage of the supply chain, is finally starting to take manifest form in the refined metal arena.
It’s not unusual for LME copper stocks to trend higher during the dog-days of northern hemisphere summer as manufacturing activity drops a gear. And, conforming with that pattern, warranting of metal has taken place at a wide variety of LME good delivery points, including Hull in Britain, Bilbao in Spain and several U.S. locations.
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