Which Way Are Copper Inventories Headed?

Copper prices have reacted to fluctuations in inventory levels over the last few quarters. Notably, copper is stocked in official warehouses like LME (London Metals Exchange) and SHFE (Shanghai Futures Exchange). Also, we have some unofficial inventories especially in bonded warehouses in China.

Looking at LME, the total inventory levels stood at 279,000 metric tons on August 16. Inventory levels have fallen slightly this month and are at the lowest level since July 5. However, we’ve seen some uptick in SHFE copper stocks (BHP) (RIO).

On the other hand, China’s bonded stocks, as estimated by Bloomberg, stand at 520,000 metric tons as of the end of July. China’s bonded stocks have fallen after rising earlier this year.

Global inventory levels seem to have stabilized after the brief spikes earlier in the year. Stable inventory levels should provide some support to copper prices. Notably, we’ve seen a fresh wave of supply disruptions in copper markets (SCCO). Copper mines in Zambia have been hit by a power outage, and according to Bloomberg, Glencore (GLNCY) has stopped production in Zambia due to the power situation. Furthermore, Freeport-McMoRan’s (FCX) Grasberg mine in Indonesia has been hit by flash floods. According to Reuters, citing Freeport’s statement, “Mining operations were continuing as normal, but power and water outages were expected in the coming days.”

Notably, the flood situation is the latest issue to have hit Freeport’s Indonesia operations. The company is facing a labor impasse in Indonesia and is involved in negotiating its long-term mining rights with the Indonesian government.

In the next and final part of the series, we’ll look at Freeport’s outlook amid the current market scenario.