China copper stocks set to fall again, heightening supply tightness concerns

SHANGHAI Copper inventories on the Shanghai Futures Exchange (SHFE) are expected to fall again this week, according to four traders, with the swift drawdown likely to lift prices and increase the incentive for traders to send copper back to China.

Copper inventories on the SHFE have already declined 60% month-on-month in April, hitting 89,307 metric tons at the end of the month and marking the sharpest withdrawal on record.

The traders told Reuters they expect to see a further decline when stocks are reported on Friday afternoon, which could lift prices and deepen backwardation for SHFE copper, a key metal for China’s vast manufacturing sector.

Backwardation occurs when it costs less to secure a commodity for delivery in a long-term contract than a near-term, usually because current demand is strong or supply is tight.

The closing price for the SHFE front-month June copper contract was 2.1% higher than the October contract on Thursday, compared with 0.75% in late-March.

“There are still some buyers taking delivery of copper, which they booked when copper prices plunged following Trump’s announcement of reciprocal tariffs. This will likely send copper stocks even lower,” one trader said.

While most refined copper being traded is produced domestically, more overseas copper is expected to flow into China as prices may rise relative to overseas markets, a second trader said.

The Yangshan copper premium, which reflects demand for copper imported into China, reached $100 per ton on Wednesday, the highest since December 2023. It has risen 43% since the end of March. Chinese consumers have been struggling to secure copper in an already tight market, exacerbated by US-China trade tensions, which has impacted imports from the top source of scrap metal for China. Instead, copper from around the world flowed to the United States as traders rushed shipments into the country before President Donald Trump’s tariffs on imports.

This shift has fuelled a surge in US COMEX stocks to 156,623 tons as on Wednesday, up 61% since the end of March and reaching their highest level since October 2018.