That said, the rate of destocking from LME warehouses has been disappointing in September, particularly in the context of the rapid build in LME stocks earlier in the year and the reported level of destocking from Chinese bonded warehouses.
So while overall inventory levels will have fallen in 2013, its likely that LME inventories will finish the year higher. This composition is important and is negative for prices.
What is problematic for copper prices is that even though metal on hand has become thinner on the ground in China, it doesn't appear that the pull for ex-China refined material is as intense as many were expecting.
This is at least in part due to Chinese inventories being way too high to begin with, so some reduction in inventory was voluntary and won't be replenished.
The flood of concentrate availability is pushing treatment and refining charges (TC/RCs) paid to smelters quite a bit higher in 2014.
With supply growth looking strong, it would be intuitive to think premiums would be looking weaker into next year. That said, the early reports from LME week is that major miners and smelters are looking to hike annual premiums for some consumers.
This maybe timing issue, with premiums currently very high thanks to the scramble for refined metal to deliver into China that started in July. But now that this is waning, it seems likely that spot premiums will come off in the not too distant future.
It also seems likely that despite an inventory reduction for 2013 as a whole, the copper market will go into 2014 with relatively high LME inventory. And this composition matters. Inventory in Chinese bonded warehouses seems more sticky, given the likely lower costs involved and also the incentive for some holders to use it for financing in China. But holders of LME inventory are going to be much more sensitive to getting rid of it given the costs involved with holding it. This is a negative for copper prices heading into next year, which by all accounts should see the market surplus increase.
