TD Securities’ Daniel Ghali warns Copper will increasingly need to draw from exchange warehouses as global deficits bite. He notes visible exchange inventories have jumped to about a third of above‑ground stocks, while much of the remainder is encumbered by China’s reserves, working inventories and landlocked US metal.

Tight unencumbered days of consumption

"Copper stocks will increasingly drain from exchange warehouses from this point forward. For years, copper traders could rely on abundant off-exchange inventories to quell any supply/demand imbalance."

"As at year-end 2023, exchange inventories only represented 5% of global above-ground copper, reflecting the fact that exchange warehouses are a venue of last resort. Today, we argue that is no longer the case, with roughly 33% of the above-ground stockpile sitting visibly in exchanges."

"The rub: a large portion of the remaining 67% is now mostly encumbered by either (1) China's Strategic Reserve Bureau, (2) minimum working inventory levels, and (3) landlocked US inventories."

"A global deficit will increasingly have to pull stocks from visible warehouses, reinforcing our view for a copper crunch."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)