China: SHFE base metals stocks surge over 18% amid policy evaluations, weak demand
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The latest weekly stock report from the Shanghai Futures Exchange (SHFE) indicated that the inventory of base metals in SHFE-registered warehouses saw a collective increases w-o-w. Among these metals, copper experienced the most significant rise in percentage terms.
Despite seasonal inventory growth, market sentiment is significantly affected by continuous evaluations of stimulus initiatives and relaxed monetary policies in China, which are influencing the demand for base metals. Worries persist regarding China's industrial demand amidst a challenging environment, underscored by four consecutive months of manufacturing PMI contraction.
Commodity-wise stocks, prices
Copper
Copper stocks in SHFE warehouses witnessed the highest inflows among all base metals. The stocks gained 18.3% to 214,487 t from the previous week's 181,323 t. Similarly, futures were marginally up by 0.3% to RMB 68,944/t ($9,581/t).
Copper inventories in SHFE warehouses doubled in just over two weeks, hitting their highest level since last March, indicating sluggish Chinese demand post-Lunar New Year. Globally, the refined copper market shifted from a deficit to a 20,000 t surplus in December, as per ICSG report.
Aluminium
Aluminium inventories in SHFE warehouses rose by 10.1% to 190,979 t, while futures prices remained stable at RMB 18,816/t ($2,614/t) for the week. Following last week's remarkable 65.6% surge, reaching a high since May 2023, stocks continued to increase this week.
Meanwhile, China's January aluminium output grew by 4.2% y-o-y to 3.562 mnt. Despite a slight decline in January's primary processing enterprises' operating rate, most domestic aluminium firms have maintained stability in February 2024.
Nickel
Nickel inventories saw a 4.5% rise, reaching 18,553 t, while nickel futures prices increased by 5%, settling at RMB 134,594/t ($18,704/t) w-o-w.
Zinc
Zinc inventories soared to 97,610 t, marking a 10.2% increase, while future prices rose by 0.8% to RMB 20,525/t ($2,852/t) from RMB 20,357/t ($2,828/t) for the week.
Furthermore, China's refined zinc output in January 2024 witnessed a m-o-m decline of 4.05%, amounting to 567,000 t, though showing a y-o-y rise of 10.9%.
Lead
Lead inventories recorded a 5.5% increase, reaching 52,892 t. Concurrently, futures prices witnessed a rise for the week by 0.4% to RMB 15,912/t ($2,211/t) from the previous week's RMR 15,850/t ($2,202/t).
