Singapore 14/09/2016 - Deliverable copper stocks in SHFE-listed warehouses fell 7,387 tonnes or 5.1 percent from last Friday to 136,329 tonnes as of September 14, according to data from the exchange. This week, Qisheng in Shanghai saw the most stock exits - 3,857 tonnes left its sheds.
This is the fifth straight week of decline for copper inventories in Shanghai Futures Exchange-registered warehouses - inventory has fallen 21.9 percent or 38,234 tonnes over that period.
The decline is in line with falling Chinese domestic market inventory due to rising copper exports from China, which was evident in the recent increase in stocks in LME-listed Asian warehouses, sources said.
But stock arrivals in the LME system appear to have subsided recently after more than 100,000 tonnes were delivered into Asian locations since the start of August.
Production cuts among some Chinese smelters for maintenance and for the G20 Summit in Hangzhou to reduce pollution also affected Chinese copper output in August, market watchers added.
Chinese electrolytic copper production fell 2.9 percent month-on-month to 645,000 tonnes in August, according to data compiled by Shanghai Metals Market (SMM).
SHFE copper stocks might not fall further because the wave of exports to LME-registered warehouses appears to be over, while some market participants have started to import due to an improved arbitrage between the SHFE and the LME, a Shanghai-based trader said.
"In fact, we sense some tightness in the market when procuring copper," he said.
Tightness in the domestic market after the shipments to LME-bonded warehouses in turn lifted premiums to a five-month high of $50-60 per tonne on a cost, insurance and freight (CIF) basis to Shanghai.
The improved arb has attracted material to the domestic market from bonded warehouses late in August and so far in September although the arb window is not seen remaining open for long.
SMM has also forecast Chinese copper electrolytic copper production at 662,000 tonnes in September, up 2.6 percent from 645,000 tonnes in August, because of production restarts among Chinese smelters.
Meanwhile, SHFE zinc stocks fell 934 tonnes or 0.5 percent week-on-week to 185,313 tonnes as of September 14, making this the eighth straight week of decline. Stocks have dipped 25,816 tonnes or 12.2 percent cumulatively since the week of July 25.
Stocks are likely to continue lower due to tightening ore supply, analysts said, but most agreed that the tightness has yet to show up in the refined zinc market.
For aluminium, SHFE stocks fell 7,437 tonnes or 5.9 percent week-on-week to 118,438 tonnes as of September 14, ending two straight weeks of increases. Chinese aluminium inventories are set to rise due to production restarts and new capacity commissioning mostly in the fourth quarter of this year.
China’s production of electrolytic aluminium fell a slight 0.8 year-on-year but rose 1.9 percent month-on-month to 2.71 million tonnes in August, according to latest data from the country’s National Bureau of Statistics.
In other metals, lead stocks slipped 247 tonnes to 40,470 tonnes, nickel inventories climbed six tonnes to 112,078 tonnes and tin stocks rose 678 tonnes to 3,633 tonnes.
SHFE stock data was published on Wednesday instead of Friday due to the Mid-Autumn festival holidays in China on Thursday and Friday.
(Additional reporting by FastMarkets physicals team, editing by Mark Shaw)