Singapore 01/07/2016 - Deliverable copper stocks at warehouses in the Shanghai Futures Exchange system rose 6,659 tonnes or 4.3 percent week-on-week to 161,894 tonnes as of July 1, according to data from the exchange. This is the first increase after seven consecutive weeks of decline.
This week, Zhongchu Wusong in Shanghai saw the most copper arrivals, with 5,930 tonnes entering its sheds.
The increase in stocks came earlier than expected but was not entirely surprising given that the off-peak period for demand has started, a Shanghai-based copper analyst said. Chinese copper demand typically slows during the summer season in June-August.
Other than slowing demand, the inventory increase also reflected higher production in June - Chinese copper smelters who had carried out maintenance restarted production at the end of May and in June, he said.
But given the size of this week's stock increase and the fact that it covers just one week, it is still too early to say that inventories will now trend higher, a Beijing-based metals analyst said.
The closed import arb between Shanghai and London since late-January will also provide support to SHFE copper stocks, sources said.
SHFE copper stocks have previously declined on a weekly basis since the week of March 21 due to the closed import window - last week saw the inventory decline at 239,542 tonnes or 60.7 percent over the past 14 weeks.
Meanwhile, SHFE aluminium stocks continued its drop, falling 21,289 tonnes or 11.5 percent week-on-week to 163,664 tonnes as of July 1.
Other than a slight increase of 513 tonnes in the week of April 18, SHFE aluminium stocks have been falling for around three months.
The decline - inventories have fallen 52.1 percent or 177,951 tonnes since the week of March 21 - reflects tightness in the domestic market following production cuts among Chinese smelters since last year, industry participants said.
The spot market tightness is reflected in SHFE aluminium remaining in a backwardation since late in April. Analysts have mostly pushed back their expectations of when spot market inventory could rise – this is now seen around the end of July at the earliest compared with initial predictions of late June.
"The downtrend in domestic aluminium inventories is unchanged as we anticipate a reversal in the stock decline only in August-September," Minmetals Jingyi Futures said in a Friday report.
In other metals, zinc inventories decreased 9,211 tonnes to 206,094 tonnes while lead stocks rose 634 tonnes to 32,417 tonnes this week. Nickel inventories gained 859 tonnes to 99,273 tonnes and tin stocks increased 573 tonnes to 2,954 tonnes.
(Editing by Mark Shaw)