Oroco Resource Corp ORRCF

Cu Price - COMEX, LME and Russian Inventory, China Demand ++

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Since my last post on Global inventory, where the COMEX has dropped to 17,071 tons, 4 days later, we see a continued drop. We have had three down days and one flat, reaching yesterday 15,854 tons. Note htat 60 days ago it was over 34,000 tons. I continue to believe we have a structural imbalance in North America due this stark and continued trend.
The LME popped yesterday, from the 64,225 tons to 70,550 tons, still in the 5 year low range. 
Note however,  according to a recent report, Russian copper share of LME inventory is near highest in a decade. As of 31 January, Russian copper made up 94.2% of total LME copper inventories. This is up from 63% in early October 2022, and just shy of a historical high of 95% seen in September 2021. However, the LME noted that market participants do continue to withdraw Russian copper from its warehouses, indicating continued demand for the material. See: https://think.ing.com/articles/share-of-russian-metal-grows-in-lme warehouses/#:~:text=contracts%20for%202023.-,Russian%20copper%20share%20near%20highest%20in%20a%20decade,95%25%20seen%20in%20September%202021.
Also see a older Reuters article: https://www.reuters.com/markets/commodities/copper-may-be-too-relaxed-about-russian-supply-threat-2022-03-23/?fbclid=IwAR2JKFSv2YpYk1--2sUeZdB7-GhQDSug9lnu-iHP66UI9oDM_bKxFbp2w8E

Much of this inventory is in Korea warehouses. What is intersting is that all other investory is gone, and whlle the market is buyng Russia copper, the US may not be able to buy russian copper when the COMEX is out of inventory. (Note that not all copper goes thrugh warehouses, so COMEX inventories are only an indicator). 
As mentioned previously, China is the big dog and today we see demand coninuing to rebound:

Discounts for Spot Copper in Shanghai Turned into Premiums, Sharp Inventory Decline Confirmed Consumption Recovery

Mar 5, 2023 20:40CST

 

Source:SMM

SHANGHAI, Mar 6 (SMM) – Spot discounts in Shanghai narrowed from above 100 yuan/mt to around zero last week. SMM reported that spot discounts of #1 copper cathode expanded from 130-80 yuan/mt against the SHFE 2303 copper contract on Friday February 24 to 10 yuan/mt to premiums of 80 on March 3.

Last week, the SHFE 2303 copper contract price fell before rallying, sinking to a low of 68,500 yuan/mt. Downstream buyers were purchasing actively while spot trades weakened in the  middle of the week due to climbing copper prices. Falling copper prices at the week's end prompted downstream buyers to purchase aggressively. In aggregate, spot trades last week outperformed the week before.

On Friday, according to SMM statistics, the social inventory of copper cathode in Shanghai declined 13,100 mt from Monday, which confirms that consumption has shown signs of improvement.

Notably, the import loss has hovered at around 1,000 yuan/mt recently. The closure of the import window has brought export opportunities to smelters, and the smelters’ shipments to the market have decreased, tightening supply of cargoes in the spot market last week. That also prompted traders to raise their spot quotes.

The contango of SHFE front-month copper contract over the SHFE next-month contract has stabilsied at around 100 yuan/mt in March, strengthening market optimism over demand for the next-month contract. Spot premiums are expected this week as the delivery of the front-month contract nears.

I remain bulish for copper prices in the coming months.