China: SHFE base metal inventories inflow increases despite fall in prices

The latest weekly inventory report from the Shanghai Futures Exchange (SHFE) indicated a significant increase in material inventories in warehouses, except for lead, which saw a 0.6% w-o-w decrease. Base metal prices declined by up to 2%, while lead prices rose by 1.8% compared to the previous week.

The Shanghai province warehouse reported the highest stock of base metal this week.

In December 2023, China's Consumer Price Index (CPI), a key inflation measure, experienced a modest 0.3% y-o-y decrease. On a monthly basis, there was a slight 0.1% increase from the preceding month. The overall CPI for 2023 showed a marginal 0.2% uptick, attributed to mitigated declines influenced by heightened consumer demand preceding the New Year holiday, according to the National Bureau of Statistics (NBS).

Conversely, China's Producer Price Index (PPI) reported a 2.7% y-o-y decline in December 2023, with a 0.3% monthly decrease. The annual PPI for 2023 revealed a 3% drop compared to the previous year. Contributing factors included the impact of reduced international oil prices and subdued market demand for select industrial products. Examining specific industries, the oil and gas extraction sector experienced a notable 6.6% m-o-m decline in December 2023, while non-ferrous metal ores mining prices increased by 0.1%, and ferrous metal ores mining prices rose by 3.2%.

Commodity-wise stocks and prices

Copper

Copper stocks in SHFE warehouses significantly increased for the third consecutive week and touched the four-month highest level at 43,085 t by 30% this week from 33,130 t last week. In contrast, copper futures inched down by 0.8% to RMB 68,180/t ($9,588/t).

Aluminium

In SHFE warehouses, aluminium inventories were largely stable this week, at 96,667 t, from 96,637 t last week. In contrast, futures decreased by 2% w-o-w to RMB 19,088/t ($2,685/t). Notably, after continuous outflow of inventories, aluminium saw an inflow of material this week.

Nickel

Nickel stocks reached 14,193 t from last week's 13,464 t, inching up by 5.4% w-o-w. Nickel prices were down marginally by 1.9% w-o-w to RMB 125,130/t ($17,598/t) compared to RMB 127,922/t ($17,990/t) last week.

Zinc

Zinc inventories in major SHFE warehouses witnessed a hike of 15.2%. The inventory stood at 25,124 t, compared to 21,814 t last week. Future prices went down by 1.5% w-o-w to RMB 21,188/t ($2,980/t).

Lead

Lead inventories recorded a slight fall in the fourth week in a row of 0.6% and stood at 52,111 t against last week's 52,449 t. Meanwhile, lead futures were up by 1.8% w-o-w to RMB 16,199 t ($2,278/t).