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Increasing Copper Exchange Stocks as Signal of Changing Global Demand

Many commodity markets had a robust start to the year with several reaching multi-year highs during February. Over the past few weeks, however, there was a notable change in global risk sentiment that led to several commodities having sizable price pullbacks. This coincided with a significant change with a major gauge of global economic strength, the copper warehouse stocks of the world’s three major commodity exchanges.

LME, Shanghai Exchange, and Comex copper exchange stocks

Source: LME, Shanghai Exchange, and Comex.

China remains the primary force behind global copper demand, so the Shanghai Exchange copper stocks are watched by many analysts and traders for early clues on Chinese commodity and financial markets. All Shanghai Exchange copper stocks are held in Chinese warehouses with the majority held around Shanghai, Guangdong and Jiangsu. From a 9 1/2-year low in late January, Shanghai Exchange stocks have risen over 121,000 tonnes and reached a 10-month high with this Friday’s reading.

The London Metals Exchange (or LME) has warehouses located in Europe, Asia and North America and is viewed as more of a global gauge of demand and economic strength. Currently, most of the current LME copper stocks are held in Rotterdam and Hamburg. COMEX Exchange copper stocks are all located in the US with most located in Tucson, Salt Lake City and New Orleans. Both the LME and COMEX have warehouses in New Orleans but are operated by different firms and are separate.

The “combined” copper stocks (LME + Shanghai plus COMEX) have risen from 214,777 tonnes at the end of January to just under 380,000 tonnes late this week, an increase of 76.8%. Keep in mind that the “combined” total remains far below the levels seen last March of over 600,000 tonnes. Although the recent increase is notable, it is not a likely early signal of a sharp slowdown in global demand or economic growth.

Originally Posted on March 26, 2021

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