Shanghai copper stock withdrawals slow, easing supply concerns

SHANGHAI, May 9 (Reuters) - Copper inventories on the Shanghai Futures Exchange (SHFE) decreased again on Friday although the rate of withdrawals slowed, easing concerns that an accelerating drawdown in stocks could cause prices to spike.

Copper inventories on the SHFE decreased by 10% since the end of April, reaching 80,705 metric tons on Friday, with the rate of decline slowing from a 23.5% drop last week and a record 32% reduction the week before.

The combination of a slower pace of withdrawals combined with a small easing of copper price backwardation eased concerns that prices would suddenly spike, traders said. Last month, some had raised concerns about a short squeeze.

"Most downstream fabricators have already taken delivery of copper in April, which they booked when copper prices plunged following Trump's announcement of reciprocal tariffs, that's why declining rate slows in May," one said.

Backwardation occurs when it costs less to secure a commodity for delivery in a long-term contract than a near-term, usually because current demand is strong or supply is tight.

The closing price for the SHFE front-month June copper contract SCFM5 was 2% higher than the October contract SCFV5 on Friday, narrowing from 2.1% from Thursday.

However, domestic supply remains tight as a closely watched gauge of demand for imports- Yangshan copper premium- is still rising.

The Yangshan copper premium reached $102 per ton on Thursday, the highest since December 2023. It has risen 43% since the end of March.

Chinese consumers have been struggling to secure copper in an already tight market, exacerbated by U.S.-China trade tensions, which have impacted imports from the top source of scrap metal for China.

Instead, copper from around the world flowed to the United States as traders rushed shipments into the country before President Donald Trump's tariffs on imports.

This shift has fueled a surge in U.S. COMEX HG-STX-COMEX stocks to 156,623 tons as on Wednesday, up 61% since the end of March and reaching their highest level since October 2018.