The inventory build-up is almost entirely due to flows to the LME, while inventories in Shanghai have been drawn down as traders make the most of the arbitrage window provided by premium prices in China.
That price gap has now all but closed, says Capital Economics, as prices in London retreat.
“Looking ahead, we think copper stocks on both the LME and ShFE will continue to build. China is facing many headwinds to growth and we have revised down our GDP growth expectations for many other key copper consuming regions, including Europe and the US.
“Lower demand, coupled with our view that Chinese refined copper output growth will remain solid, is driving our view that copper stocks on both exchanges will end the year higher than at end-2021, weighing on prices.”
