Commodity reported that prices sold off sharply and remains at lower levels this morning. Sentiment has taken another turn for the worst with bearish sentiment becoming increasingly engrained. SHFE stock data surprised by showing a draw of 8,800 tonne in copper which we believe also goes alongside draws in bonded warehouses. Aluminum inventories fell 8,700 tonne, Lead also fell 1,700 tonne while Zinc increased 20,700 tonne. Given the increase in SHFE registered zinc warehouse capacity we could see further builds in zinc inventory over the coming weeks. On the LME, there was another huge increase in aluminum inventories of 104,000 tonne due again to a large delivery into Vlissingen. This large increase has not weighed on prices, however. Market expectations had been for large deliveries into European warehouses with capacity at the location having been extended and much of the metal believed to have been put on financing. Demand data releases today have painted a softer picture. Japanese Copper wire and cable shipments fell sharply in July down 7.5% YoY to 55,100 tonne which shows that the earlier than expected recovery is still on shaky ground. North American Aluminium producer shipments and inventories data showed a sharp weakening in July. The pace of growth in shipments of mill and ingot products fell to 1.1% YoY from 6.4% the previous month. This was the second consecutive month of slowing growth. There was a build in the inventory shipments ratio to the highest since July 2009. We believe some short term dislocations may have affected the data including supply chain disruptions from Japan, though given the weakening in economic conditions we will be monitoring this demand data for signs of whether the slowdown becomes protracted.

Source