As stockpiles fall, which metals are really in tight supply?

But rising inventories of metals at smaller rival exchanges suggest the real supply picture is more mixed.

Stocks of metal in warehouses monitored by the Shanghai Futures Exchange (ShFE) more than doubled last year with aluminium stockpiles surging 649 percent to a record high of 754,133 tonnes as output in China jumped.
Copper stocks in CME Group warehouses in the United States meanwhile leapt 139 percent to a record 232,777 tonnes.

“The LME in theory is a barometer of supply and demand and looking at LME stocks you’d be pretty bullish on metals prices,” said Robin Bhar, head of metals research at Societe Generale.
“But if you look at the global picture and include ShFE and Comex you probably want to be a bit more neutral.”

Concerns over tight supplies together with a surge of speculative buying drove prices of metals including copper, aluminium and zinc up around 30 percent last year to multi-year highs.

But 2017 saw real tightness of supply only for lead and zinc, said Bhar. Total lead inventories in all exchange warehouses fell 18 percent last year to 184,233 tonnes while zinc stocks plunged 57 percent to 249,605 tonnes.
The picture of more plentiful supply is borne out in the spreads between longer and shorter dated contracts.

The premium for 3-month LME zinc over the 15-month contract increased throughout 2017 and was around $120 on Monday, showing rising demand for metal in the short term.

But copper, aluminium and nickel showed the opposite trend, signalling comfortable availability of near-term supply.

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