China copper and aluminum inventories continue to decline, with copper spot premium rising to US$100/t

Overview

This report is J.P. Morgan's high-frequency tracking of China's metals inventories for the week ended July 17, 2026, primarily using changes in China's visible inventories as a proxy for end-demand activity. The report believes that copper and aluminum have posted strong destocking for a fifth consecutive week, with consumption momentum in June-July improving relative to May; at the same time, China's second-quarter GDP, fixed asset investment, and total social financing growth indicate a weak macro backdrop, resulting in clear divergence within metals.

Core views

The core view is that physical demand signals for copper and aluminum are strengthening: copper inventories have fallen to about 120kt, aluminum inventories have returned to about 1Mt, and the Yangshan copper premium has reached US$100/t. JPM Commodities Research expects a sizable deficit to potentially emerge outside China in 3Q, which could push up LME prices to attract metal flows from China to the global market. By contrast, zinc restocking and a year-over-year rise in steel inventories suggest demand across some industrial metals remains uneven. On the equity side, the report prefers Antofagasta for its leverage to copper prices and growth support, maintains neutral ratings on BHP and Rio Tinto, and is more cautious on Anglo American.

Analysis framework

The report uses a high-frequency inventory channel-check approach, tracking Chinese inventories or shipment data for copper, aluminum, zinc, steel, and iron ore from sources including SHFE, bonded zones, regional warehouses, CRU, SMM, and J.P. Morgan Commodities, and interprets destocking or restocking changes as signals of consumption strength or weakness.

Methodology notes

• High-frequency data trackingChina metals inventory channel check

  Using changes in visible inventories as a proxy for end consumption

  Rapid destocking usually implies improving downstream consumption or tight supply, while restocking usually implies weakening consumption or rising supply pressure; the report focuses on weekly inventory changes after Chinese New Year and comparisons with the same period.

• Commodity supply-demand analysisRegional supply-demand gap and price inducement mechanism

  A deficit outside China in 3Q could lift LME prices

  If a sizable supply deficit emerges outside China, LME prices may need to rise to attract metal flows from China to the global market.

Asset mapping & comparison

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

• Copper

  Core beneficiary asset

  Strengths

  Rapid inventory drawdown, visible inventories at a low level for the same period over the past decade, and the Yangshan copper premium rising to US$100/t.

  Weaknesses

  China's 5M'26 consumption-weighted end demand had previously declined 5% YoY, and the macro credit and investment backdrop remains weak.

  Comparison

  Compared with zinc and steel, copper's high-frequency destocking and spot premium signals are stronger.

  Risks

  If destocking is driven by short-term restocking or supply disruptions rather than genuine end demand, price support may weaken.

• Aluminum

  Benefiting from improved consumption signals

  Strengths

  Consecutive strong destocking, with about 54kt drawn down last week and inventories returning to about 1Mt.

  Weaknesses

  Demand data in May was weak, with improvement mainly coming from high-frequency signals in June-July.

  Comparison

  Like copper, aluminum is seeing destocking, but lacks a spot premium indicator like the Yangshan copper premium.

  Risks

  If macro activity continues to slow, the pace of destocking may be difficult to sustain.

• Zinc

  Relatively weaker asset

  Strengths

  The report does not provide a clear positive catalyst.

  Weaknesses

  About 3kt of restocking last week, with total inventories at 268kt, more than 130kt above the five-year average for the same period.

  Comparison

  In contrast to the continuous destocking in copper and aluminum.

  Risks

  High inventories may weigh on zinc prices or the performance of related assets.

• Steel

  Demand signal remains cautious

  Strengths

  Manufacturing performance remains relatively resilient.

  Weaknesses

  Steel mill profits are being dragged down by rising coking coal prices, while steel inventories are up 12% YoY.

  Comparison

  Weaker than the destocking signals for copper and aluminum.

  Risks

  Contracting fixed asset investment and rising inventories may continue to pressure profits across the steel chain.

• Iron ore

  Supply-demand watch asset

  Strengths

  Inventories drew down by about 3Mt last week, while global shipments posted only limited month-over-month growth in May.

  Weaknesses

  Global shipments declined year over year, with both Australia and Brazil posting negative YoY growth.

  Comparison

  Iron ore signals are more mixed than those for copper and aluminum, being influenced jointly by steel demand and shipment cadence.

  Risks

  If Chinese steel demand weakens, iron ore destocking may be difficult to sustain.

• Antofagasta

  Preferred stock in the report

  Strengths

  Support from copper prices, undemanding 2028E valuation, and more than 30% brownfield growth that could drive a free cash flow inflection.

  Weaknesses

  Still exposed to the copper price cycle and project execution risks.

  Comparison

  A preferred name for J.P. Morgan among EMEA mining stocks.

  Risks

  A decline in copper prices or weaker-than-expected delivery of growth projects.

• Anglo American

  Underweight stock

  Strengths

  Has diversified mining asset exposure.

  Weaknesses

  Cost inflation risk in the iron ore division, and potentially weak H1'26 diamond business results.

  Comparison

  Viewed less favorably than Antofagasta, BHP, and RIO's London-listed shares.

  Risks

  Cost inflation and weakness in the diamond business may weigh on earnings.

Key data

• Weekly copper destocking17ktIn the week ended July 17, 2026, China's copper inventories declined again.
• China visible copper inventoriesAbout 120kt; chart marked at 119ktAbout 30kt below the 2025 low and at a low level for the same period over the past decade.
• Yangshan copper premiumUS$100/tReached this level last week, the first time since May 2025.
• Weekly aluminum destockingAbout 54ktThe report text says aluminum drew down by 54kt last week, while the chart commentary also mentions 52kt; both point to strong destocking.
• China visible aluminum inventoriesAbout 1MtFell back to around 1 million tons after recent strong destocking.
• Zinc inventories268ktMore than 130kt above the historical five-year average for the same period, with about 3kt of restocking last week.
• China Q2 real GDP4.3% YoYBelow 5.0% YoY in 1Q.
• June TSF growth7.4%Slowed by 0.3 percentage points from the prior period, falling to a historical low.
• China steel inventoriesFlat WoW, +12% YoYInventories have risen since June.
• Iron ore inventoriesAbout 3Mt drawdown last weekPreviously inventories were broadly flat for about 9 weeks.
• Global iron ore shipments+2% MoM, -2% YoY in MayPer Figure 11 definition.
• Australia iron ore shipments+5% MoM, -2% YoY in MayPer Figure 12 definition.
• Brazil iron ore shipments-3% MoM, -8% YoY in MayPer Figure 13 definition.

Impact & implications

For investors, the destocking in copper and aluminum and the rise in the copper premium support near-term resilience in copper and aluminum prices, and also benefit mining companies with higher copper exposure and free cash flow that is sensitive to prices. However, weak macro financing, fixed asset investment, and some metals inventory indicators mean this should not be simply extrapolated into a full recovery across the entire metals demand cycle; differentiation is still needed across the copper-aluminum, zinc, steel, and iron ore chains.

Risks

• Weaker Chinese macro data, including slower Q2 real GDP, a clear contraction in fixed asset investment, and TSF growth falling to a low level, could undermine the sustainability of metals consumption.
• Destocking in copper and aluminum may be influenced by short-term restocking, supply disruptions, or inventory transfers, and may not fully represent a broad improvement in end demand.
• Zinc restocking and a year-over-year rise in steel inventories show divergence in metals demand, and weaker segments may drag on sector sentiment.
• Rising coking coal prices are squeezing steel mill profits, which may affect demand across the iron ore and steel chain.
• If the expected deficit outside China in 3Q falls short, the case for higher LME prices and cross-regional metal flows may fail to materialize.

What to watch

• Whether China's copper and aluminum inventories continue to decline consecutively, especially whether copper inventories can remain at a low level for the same period over the past decade.
• Whether the Yangshan copper premium stays around US$100/t or continues to rise, to validate the strength of demand in the physical market.
• Whether zinc inventories fall back from elevated levels, or continue restocking and weighing on zinc prices.
• Changes in China's steel inventories, steel mill profits, and coking coal prices, to judge whether pressure in the ferrous chain is easing.
• Whether the 3Q deficit in metals markets outside China materializes, and whether LME prices need to rise to attract Chinese metal flows to the global market.
• Follow-up earnings and cost guidance from Antofagasta, BHP, RIO, and Anglo American, especially regarding copper price sensitivity, iron ore costs, and diamond business performance.