For as long as your humble scribe can remember*, we’ve been running coverage on copper inventories at The IKN Weekly in order to get a handle on the metal, as well as to notice when the inventory signal matters and when it doesn’t. Right now it does and the reason is the SHFE stock levels, here’s the normal chart we run:
And to get a clear picture, here’s the same dataset with everything over 200k lopped off:
Copper hasn’t been this tight in SHFE warehouses since 2011, which isn’t even a comparable when one considers how much the SHFE has grown. What’s more, add in LME and Comex and world stage copper inventories haven’t been as tight since 2014 but that was also a very different world, or as we put it in the short accompanying note in Sunday’s edition:
Back then the market was very different, the financial world steered well clear of holding copper, funds dumping their 2013 positions before the price lows of 2015 and 2016 came along. This time, the lack of stock is due to pure physical demand from end-users, houses only have control of large positions via futures contracts, not by ownership.
What normally happens after Christmas is the Chinese re-stock period, as we move into and beyond their New Year (Feb 12th), you see those as the spikes in the top chart. A lot of eyes on just how low we go before that, as well as when and where the re-stock tops out.
*up to two weeks