China's Copper Stocks Rise Out of Season, Aluminum Stocks Continue to Decline, Iron Ore Freight Costs Plunge

Overview

This report is JPMorgan’s weekly high-frequency tracking update on Chinese metals activity, covering the week ending June 12, 2026. The core findings highlight a divergent picture in China’s metals market: copper stocks have seen an unusual seasonal build-up, signaling weaker near-term physical demand, while aluminum continues to decelerate inventory at a pace above seasonal norms. Zinc inventories remain elevated. Meanwhile, macroeconomic data point to sluggish credit demand, though the sharp drop in iron ore shipping costs could improve the effective landed price of FOB iron ore.

Core views

In non-ferrous metals, copper presents a concerning signal. Last week, China’s visible copper stocks (SHFE + bonded warehouses) surged by 27 thousand tonnes (kt), breaking six weeks of relative stability. Historically, this period typically sees destocking, so this anomaly suggests softening near-term physical demand. Although China’s total copper inventory remains relatively low at 245 kt, and the Shanghai Futures Exchange (SHFE)–London Metal Exchange (LME) arbitrage window has opened—drawing some metal into China—the firm’s demand tracker indicates that Chinese copper demand is actually weakening, primarily due to slower renewable-energy installations and subdued white-goods production. This is further reflected in the Yangshan copper premium, which has fallen to around $60 per tonne. In contrast, aluminum has shown greater resilience. Last week, China’s aluminum stocks dropped sharply by 63 kt, marking the second consecutive week of robust destocking—exceeding seasonal averages. This positive trend began with a gradual recovery after the Spring Festival and has been partly fueled by higher prices triggered by supply disruptions in the Middle East. Although China’s total aluminum inventory remains high at 1.3 million tonnes (Mt), the ongoing destocking suggests that downstream demand is gradually being released. Moreover, with both aluminum and zinc export arbitrage windows open, Chinese inventories are flowing into global markets, providing support to their prices. Zinc, by contrast, has remained relatively flat. Last week, zinc stocks increased by just 3 kt, and physical consumption data have shown weakness for nine consecutive weeks. While there is no conclusive evidence yet that aluminum demand has been “destroyed,” prolonged weakness in China’s construction sector suggests that zinc demand will likely remain subdued. Current zinc inventories stand at 265 kt, at the highest seasonal level since 2022. Turning to ferrous metals and shipping costs, a notable development is the decline in iron ore freight rates. Preliminary Mysteel data show that bulk shipping rates from Australia to China have dropped sharply to $10.9 per tonne (from $14.0). If this change is confirmed in this week’s official quotes, it would represent a roughly 35% decrease over the past two weeks. This is good news for iron ore buyers, as lower freight costs will directly boost the FOB price, lifting it from Friday’s close of $88 per tonne to around $91. Meanwhile, Chinese steel mills’ margins remain under pressure from rising coking coal prices; crude steel output edged up 0.5% to 8.57 million tonnes, but apparent consumption declined slightly. On the macro front, weak economic data corroborate the softness in demand. China’s year-on-year growth in new loans slowed to 5.5% in May, the weakest pace since May 2009, dragging total social financing (TSF) growth down to a record low of 7.7%. JPMorgan economists estimate that the credit impulse (TSF growth minus nominal GDP growth) eased by 0.3 percentage points to 3.3%, with declining corporate and household lending signaling tepid real demand.

Analysis framework

The report employs a typical analytical approach combining high-frequency data tracking with fundamental validation. First, it monitors weekly inventory changes at the Shanghai Futures Exchange (SHFE) and bonded warehouses—among the leading indicators of China’s end-consumer demand—to identify divergences in demand strength across copper, aluminum, and zinc. Second, it incorporates basis arbitrage logic (e.g., SHFE–LME spreads, export arbitrage windows) to explain abnormal inventory movements and avoid misinterpreting isolated data points. Third, it integrates macroeconomic indicators (e.g., credit impulse, TSF growth) to validate the demand trends reflected in micro-level inventory data, creating a closed-loop analysis from macro to micro. Finally, it uses freight-rate data to disaggregate upstream raw-material costs and assess their impact on commodity FOB prices.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Inventory Changes as a Proxy for Demand

  In commodity research, because end-sales data often lag, analysts frequently use high-frequency inventory-change data—especially destocking rates—to infer current consumption intensity. Rapid destocking usually signals strong demand, while unexpected stock builds warn of weakening demand.

• Industry/Industrial Analysis FrameworkUpstream–Midstream–Downstream Transmission in the Value Chain

  Impact of Freight Costs on FOB Prices

  For imported raw materials like iron ore, the CIF price consists of the FOB price plus freight. When freight rates fall sharply, even if the total landed cost remains unchanged, the seller’s realized FOB price rises, improving miners’ profit margins. This cost breakdown helps assess shifts in profit distribution along the value chain.

• Event-Based Arbitrage and Behavioral Finance

  Impact of Cross-Market Arbitrage on Inventory Distribution

  When price differences between markets for the same commodity exceed transportation and transaction costs—for example, when SHFE prices exceed LME prices plus freight—traders move goods from one market to another to capture risk-free profits. The report notes that the SHFE–LME arbitrage window explains part of the increase in copper stocks, reminding readers to distinguish between “genuine demand weakness” and “inventory redistribution driven by logistics.”

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Rio Tinto plc (RIO.L)

  Beneficiary Logic: As a major global iron ore supplier, Rio benefits from falling freight costs, which could boost its FOB realization prices and improve revenue quality, despite broader demand weakness.

  Weaknesses

  Stagnant Chinese steel output and weak demand may restrain overall sales volumes.

  Risks

  If China’s credit recovery falls short of expectations, long-term demand prospects will remain subdued.

• BHP Group Ltd (BHG SJ)

  Beneficiary Logic: As another leading iron ore producer, BHP stands to gain from the revaluation of FOB prices following the freight-rate decline.

  Weaknesses

  High sensitivity to Chinese macroeconomic data.

  Risks

  Same as above.

• Norsk Hydro (NHY.OL)

  Association Logic: As an aluminum company, Norsk Hydro benefits from the ongoing destocking trend and the open export arbitrage window, which supports its aluminum prices and sales.

  Strengths

  Its aluminum business benefits from the destocking trend.

  Risks

  Fluctuations in energy costs and global trade barriers.

• Anglo American (AGLJ.J) and Lundin Mining (LUMIN.ST)

  Affected/Under Pressure Logic: Their copper operations face challenges from weakening demand and inventory buildup, while zinc exposure is weighed down by China’s sluggish construction sector.

  Weaknesses

  The decline in the copper premium reflects light spot-market buying interest.

  Risks

  Slower deployment of new energy projects directly undermines copper’s long-term growth story.

Key data

• Weekly Change in China’s Copper Stocks+27 ktOut-of-season increase; current total inventory is 245 kt
• Weekly Change in China’s Aluminum Stocks-63 ktSecond consecutive week of strong destocking; current total inventory is 1.3 Mt
• Weekly Change in China’s Zinc Stocks+3 ktPhysical consumption has been weak for nine weeks
• Australian–Chinese Iron Ore Freight Rate$10.9/tDown from $14.0/t by about 22%–35%, back to pre-war levels
• China’s May Loan Growth+5.5% YoYNew low since May 2009
• China’s Credit Impulse3.3%Eased by 0.3 percentage points
• China’s Weekly Crude Steel Output8.57 MtUp 0.5% week-over-week

Impact & implications

The unexpected accumulation of copper stocks, coupled with weak macro credit data, jointly point to insufficient momentum in China’s real economy—particularly in manufacturing and infrastructure-related sectors. However, aluminum’s destocking trend and the presence of export arbitrage provide some price support for the non-ferrous metals segment, mitigating the risk of a one-sided decline. For the iron ore market, the sharp drop in shipping costs is a short-term boon, easing importers’ landed-cost pressures and potentially encouraging mills to maintain modest restocking despite constrained margins, or at least improve their reported profitability. Overall, the market is in a demand-validation phase, and investors should remain vigilant for price volatility stemming from weaker-than-expected macro demand.

Risks

• China’s macroeconomic recovery falls short of expectations, particularly with continued weakness in real estate and infrastructure investment.
• Changes in global trade policy could close export arbitrage windows or raise tariffs.
• Sharp fluctuations in shipping rates; if freight rebounds too quickly, the benefit could be offset.
• Geopolitical conflicts (e.g., in the Middle East) could further disrupt supply chains, causing abnormal price swings.

What to watch

• Mysteel’s official iron ore freight-rate announcement next week to confirm whether rates have indeed returned to pre-war levels.
• China’s credit data and policy stimulus measures in the coming months to gauge any substantive recovery in demand.
• The persistence of the SHFE–LME copper arbitrage window and the trajectory of the Yangshan copper premium.
• Export-flow data for aluminum and zinc to verify whether arbitrage continues to drive inventory outflows from China.