LONDON, June 25 (Reuters) - Copper stocks registered

with the world's big three exchanges have risen above 500,000

metric tons for the first time since August 2021.

London Metal Exchange (LME) inventory has surged by 56,850

tons so far this month and at 172,850 tons is the highest it has

been since December last year.

At least some of the recent inflow has come from China,

where smelters have capitalised on LME copper's spike to a

record nominal high of $11,104.50 per ton in May.

China can afford to ship some units. Shanghai Futures

Exchange (ShFE) stocks currently stand at 322,910 tons, down

only slightly from a four-year high of almost 337,000 tons

earlier in June.

The one exception to this trend remains the CME's

COMEX division, where inventory has shrunk to just 8,274 tons,

the lowest since 2008.

CME shorts have little option other than to roll positions

forward, prolonging a running squeeze in the U.S market.

COPPER, COPPER EVERYWHERE...

Rising global exchange stocks of copper have damped bullish

spirits, which is why the LME three-month price has

fallen back below the $10,000-per ton level, last trading around

$9,600.

The growing mountain of metal also explains the wide

contango structure on both London and Shanghai exchanges. The

LME benchmark cash-to-three-months period stretched to

a contango of $150 per ton early Tuesday, almost matching last

month's record cash discount of $152.50.

Chinese smelters have made no secret of their plans to

deliver up to 100,000 tons of copper to LME warehouses.

Sure enough, exports spiked to 73,829 tons in May, the

highest monthly outbound volumes since 2016.

It's likely no coincidence that the main points of arrival

in the LME warehouse system this month have been those closest

to mainland China. The Taiwanese port of Kaohsiung has received

29,325 tons and the Korean ports of Gwangyang and Busan have

registered inflows of 20,400 and 9,675 tons respectively.

Chinese refined metal imports have been robust this year but

stubbornly high visible stocks explain why the country's

producers are happy to sell physical metal into the Western

market.

ShFE stocks have conspicuously failed to draw after the

lunar new year holidays, breaking a multi-year pattern of rapid

early-year build followed by equally rapid depletion over the

second quarter.

Bonded warehouse stocks have risen from under

10,000 tons in January to a current 89,700 tons, according to

local data provider Shanghai Metal Market.

...BUT NOT IN THE UNITED STATES

While cumulative inventory on the LME and ShFE has more than

doubled in the first half of the year, very little metal seems

to have made its way to the United States.

CME warehouses, all on home soil, have not seen any inflows

since May and metal has been steadily trickling out of the

system ever since.

LME warehouses in Mobile and New Orleans hold a residual

1,375 tons, all but 725 tons of it awaiting physical load out.

COMEX time-spreads have flared into backwardation again over

the last couple of weeks as short-position holders move down the

forward curve ahead of the expiration of the June contact.

The squeeze has not been as vicious as that in May but it is

a sign there are players who are still short and caught, whether

in terms of outright price, spreads or a combination of the two.

The disconnect with the London and Shanghai markets is stark

and highly unusual.

THE WAITING GAME

Physical arbitrage will close the yawning gap between the

United States and the rest of the world.

But it has clearly has not yet happened. It does not help

that most of what is stored in the LME system does not qualify

as a good-delivery brand on the CME.

Chinese and Russian metal accounted for 72% of on-warrant

LME stocks at the end of May. The ratio is likely to have risen

further in June given the burst of arrivals at LME ports close

to China.

Chinese brands are not deliverable against the CME copper

contract. Neither are Russian brands, although it would not make

any difference if they were since the Biden administration

banned all Russian copper imports in its latest sanctions

package.

The CME's good-delivery list is weighted heavily towards

domestic, South American and Japanese brands, limiting

availability for anyone wanting to divert copper to the United

States.

This has become a waiting game as shorts shuffle down the

forward curve with one eye on the horizon for signs of inbound

shipments.

Until they arrive, the COMEX market is going to remain a

turbulent ride for copper bears.

The opinions expressed here are those of the author, a

columnist for Reuters.

(Editing by Jason Neely)