ING analysts Warren Patterson and Ewa Manthey report that LME copper has moved back above $13,000/t as Chinese buyers return from Lunar New Year, with Yangshan premiums hitting a two‑month high. They stress that elevated SHFE and LME inventories and deep contango in time spreads indicate a well‑supplied market despite early signs of demand recovery.

Chinese buying meets high inventories

"Copper prices on the LME have moved back above $13,000/t as Chinese participants return from the Lunar New Year holidays on Tuesday, increasing import appetite. The Yangshan copper premium, an indicator of China's import demand, has risen to $53/t, a two-month high, from around $33/t before the Lunar New Year holiday. This suggests increasing buying interest."

"This improvement in demand, however, comes amid elevated inventories. SHFE stocks remain high following seasonal builds, while LME inventories have continued to trend upward. This suggests that, despite the rebound in Chinese demand, the global copper market remains well supplied for now."

"LME time spreads remain in a deep contango, reflecting ample nearby availability. While stronger Chinese imports should help absorb some excess material, a sustained tightening in spreads will likely require clearer evidence of inventory draws, both in China and on the LME."

"Overall, the market is showing early signs of demand recovery. Yet high inventory levels are likely to cap the pace of any near‑term tightening. The next key indicator will be whether the import arbitrage stays open and leads to sustained LME stock draws, accompanied by a quicker‑than‑seasonal decline in SHFE inventories."

"Positioning data from the latest LME COTR shows that funds cut their net long in copper by 3,393 lots to 33,882 lots, the lowest level since October 2023. Money managers also reduced net long positions in aluminium by 4,486 lots to 92,972 lots. Speculative zinc positions fell by 844 lots after five consecutive weeks of gains, leaving the net long at 44,587 lots."

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