SHFE base metal inventories fall w-o-w due to lower imports, increased consumption

The registered warehouses of the Shanghai Futures Exchange (SHFE) in China witnessed a notable decrease in base metal inventories this week. This was due to a reduction in imports and a rise in domestic consumption, leading to a significant outflow of stocks. The decline in inventory pushed up future contract prices of these metals.

Base metals prices remained supported on hopes of Chinese stimulus measures following recommendations from government advisors to cut interest rates as part of support policies amid the country's economic slowdown.

Market participants' focus was on the rainfall predictions in Yunnan, the primary region for aluminium production in China, where limited hydropower generation had kept metal production capacity limited.

In the copper sector, mine disruptions eased. Some new production capacities have been introduced though these are still not enough to process ores.

China's total exports in May fell by 7.5% y-o-y. This was the largest drop seen since January and a significant reversal from April's 8.5% growth.

Commodity-wise inventories in SHFE warehouses

• Aluminium
  
  

Total aluminium inventories have reached their lowest level this week since Jan'23, standing at 123,669 tonnes (t). This marks a significant decline of 23,370 t compared to the previous week. The drop in inventory was due to rise in consumption in line with increased molten aluminium output by smelters.

The average price of aluminium futures inched up by 0.6% to RMB 18,201/t this week.

• Copper
  
  

Copper stocks in SHFE warehouses decreased to 76,473 t this week from 86,648 t in the previous week. Simultaneously, prices of copper futures increased by 1.9% w-o-w to RMB 66,518/t.

In June, several smelters conducted maintenance activities, leading to tight supply in the market. However, weak downstream demand offset this situation.

• Nickel
  
  

Nickel stocks stood at 3,294 t at the end of this week, down from previous week's 3,678 t. Meanwhile, nickel prices remained relatively stable w-o-w at RMB 158,772/t compared to RMB 159,698/t in the previous week.

• Zinc
  
  

Following a consistent decline in inventory over the past four weeks, zinc inventories in the major warehouses of SHFE rose. Currently, the inventory stands at 47,655 t compared to 47,011 t in the preceding week. Meanwhile, future prices edged up by 1.3% w-o-w to RMB 19,543/t.

• Lead
  
  

Lead inventories saw a notable increase for the third consecutive week, reaching 36,471 t from previous week's 34,087 t. Lead futures went up by 1.5% to RMB 15,334/t.

Recently, lead ingot stocks in the domestic and overseas markets have risen amid falling exports due to high prices.