According to ING analysts Warren Patterson and Ewa Manthey, copper prices continue to be supported by tight inventories on the London Metal Exchange (LME) and robust flows of the metal into the United States [1]. The analysts highlight a significant increase in cancelled warrants on the LME, which rose by 51.4kt—the largest daily rise since May—indicating renewed withdrawals from warehouses and ongoing concerns about limited exchange inventories [1].
While recent deliveries into LME warehouses had temporarily eased some of the tightness, the latest withdrawals suggest that any recovery in inventories may be short-lived [1]. The analysts note that inventory movements remain a key focus for the market, as exchange stocks are still relatively low [1]. Additionally, strong US-bound flows are contributing to elevated US copper premiums, further supporting prices [1].
Despite copper's nearly 15% year-to-date increase, ING points out that record-high prices are beginning to raise demand concerns in China [1]. The market remains vulnerable to further bouts of tightness and volatility due to these ongoing inventory dynamics and strong US demand [1].
CONCLUSION
Copper prices are being sustained by tight LME inventories and strong US demand, with recent data showing significant withdrawals from warehouses and a sharp rise in cancelled warrants. While these factors support the market, record-high prices are starting to impact demand in China, leaving the market exposed to further volatility.