LONDON, Oct 19 (Reuters) - The amount of available copper in the London Metal Exchange's (LME) warehouse network has halved over the last eight days.
Headline stocks of 139,000 tonnes may look healthy enough but a string of daily cancellations means that 48% of that tonnage is now awaiting physical load-out, leaving just 72,950 of live stocks.
The stocks grab looks strange, given the rapidly darkening outlook for demand as Europe heads into recession and U.S manufacturing growth brakes sharply.
But the clue lies in China, where a squeeze on the Shanghai Futures Exchange (ShFE) has generated a scramble for metal.
SHANGHAI SQUEEZE
The ShFE copper contract has been characterised by low inventory and rolling tightness for some time. But things have come to a head since the market reopened after the Golden Week holidays and in the run-up to the October contract's expiry on Monday.
Market open interest surged to 454,074 contracts at the end of last week, the highest level of participation since 2015, as the front part of the curve tightened.
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Deliveries against short positions have been accelerating. Total registered ShFE stocks more than doubled over the holiday period to 63,746 tonnes with on-warrant inventory jumping from 3,729 to 25,588 tonnes.
More has arrived this week, on-warrant stocks mushrooming to 70,547 tonnes as of Tuesday.
Shanghai is now acting as a magnet on available copper units both in China and the rest of the world.
YANGSHAN YANKS THE SUPPLY CHAIN
It's clear the first point of call for Shanghai shorts has been the copper sitting in the city's bonded warehouses.
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