Copper market sentiment dented by stock rise
This article is an extract of the monthly Commodity Briefing Service for Copper which examines copper market trends over the past month.
Julia Tilley | 19 May 2017
The copper LME three-month price closed May 16 at US$5,611/t, almost 10% lower than the recent peak of US$6,204 on February 13. The trend has been inexorably downward, although the market is now trading above the US$5,463/t low realized on May 8. A raft of less-than-supportive market and macro data has weighed on sentiment and kept prices under pressure.
The resolution of labor action at Escondida, whilst taking an estimated 270,000-290,000 tonnes of copper out of the market, was not as prolonged as it potentially could have been. Also, the strike at Grasberg fizzled out, with only around 1,700 workers joining in, as opposed to the 5,000 or so indicated earlier by the unions. There do not appear to be any further major disruptions currently being priced in by the market.
Significant deliveries of metal into LME warehouses between April-end and early May particularly spooked market participants. Total LME copper inventories stood at 253,675 tonnes on April 28, but by May 4 had skyrocketed by around 40% to 354,650 tonnes. Although stocks were reduced slightly — by 32,150 tonnes — through May 15, another inflow of 17,100 tonnes has kept the market on edge.
Given that the bulk of the cumulative stock build has been in Asian warehouse locations has prompted fears that Chinese demand may be on the wane. Even though inventories on the Shanghai Metal Exchange have fallen by 117,591 tonnes since the end of April, this may reflect a shift in material onto the LME, rather than any pick up in underlying demand.
