(The opinions expressed here are those of the author, a columnist for Reuters)
* Graphic on global exchange stocks of copper: tmsnrt.rs/2pSVt6I
By Andy Home
LONDON, May 8 (Reuters) - Copper stocks registered with the London Metal Exchange (LME) surged by almost 98,000 tonnes last week.
That was down to the mass warranting of 126,150 tonnes in the LME system in the space of just three days.
This sudden manifestation of metal may not have been the only reason for copper's slide below $5,500 for the first time since the beginning of January.
The whole industrial metals complex was on the back foot last week as fears of Chinese slowdown fanned out from collapsing iron ore and steel markets in China.
But a 50 percent increase in headline stocks to 354,650 tonnes and a doubling of on-warrant stocks to 243,300 tonnes didn't exactly help sentiment either.
Which was the point.
Because over recent months LME copper stocks have become a battleground for two competing market narratives.
Price signals have become polarised as bear and bull fight it out in the physical market place.
Lost in the resulting fog of war is one genuinely interesting stocks development taking place away from this LME battlefield.
Last week's LME stocks surge was almost a carbon copy of a similar flurry of warranting at the start of March, when 141,625 tonnes were delivered into the system in the space of four days.
Once again, most of the activity took place at Asian locations.
Singapore, South Korea's Busan and Taiwan's Kaohsiung all featured heavily with some inflow also registered in Europe at Rotterdam, mirroring the distribution of March's inflow.
Once again, the sheer tonnage argues against these being actual "arrivals" of copper. Rather, it was in all likelihood metal that was already sitting in warehouse awaiting the push of the warranting button.
Some of it has quite possibly come from the handful of Chinese smelters authorised to engage in tolling contracts, converting concentrates into refined metal which can be exported without paying the 15 percent export duty.
China exported 426,000 tonnes of refined copper last year, still a fraction of what it imports but the largest ever outflow. Another 105,000 tonnes were exported in the first quarter with South Korea and Taiwan the two top destinations.
The exact origin, however, is of secondary importance to the point being made, namely that there is a lot of free-float copper, particularly in Asia, which should mean lower prices.
Except that what has just arrived in the LME system is unlikely to stay there long.
LME open tonnage, meaning that not earmarked for physical load-out, more than doubled from 88,750 tonnes to 194,825 tonnes after those early-March "arrivals".
By the end of April it had fallen back to 121,250 tonnes thanks to a steady flow of cancellations and then physical drawdowns of stock.
This is how the game works.
Whatever the bear throws at the system, the bull soaks up and physically removes.
This tug-of-stocks-war has actually been playing out a long time. It's just that the stakes are rising all the time.
The market was shocked by the appearance of 65,550 tonnes in the LME system in a single week in June 2016.
These days, it seems, you need twice that sort of tonnage to make your point.
Indeed, last week's inflow was as large as most analysts' calculated global market balances this year.
Bear and bull, however, are cancelling themselves out in this stocks war.
The LME headline copper stocks figure is currently up by a net 39,725 tonnes on the start of the year, a fairly modest build by "normal" seasonal standards, albeit one that has resulted from some violent monthly swings.
Graphic on global exchange stocks of copper:
Total global exchange stocks currently stand at 707,000 tonnes, up by 170,600 tonnes since the beginning of 2016.
The next swing of the pendulum is likely to be downwards.
The LME bear seems to have run out of ammunition, judging by the lack of fresh "arrivals" in this morning's LME report.
The amount of copper registered with the Shanghai Futures Exchange (ShFE), meanwhile, is now trending lower, reinforcing the impression that there is a China leg in this flexing of physical muscle by two of the market's biggest players.
The one part of the global stocks picture that is generating a consistent trend is the CME warehousing system in the United States.
CME copper stocks HG-STX-COMEX rarely get a mention in the copper market dialogue because historically they have tended to be small relative both to LME and ShFE systems.
But at a current 155,064 tons (140,673 metric tonnes) they are at their highest since 2004 after almost a year of continuous build.
This uptrend accelerated noticeably in the first quarter of this year, when the CME-LME arbitrage flared out in favour of U.S. deliveries.
It's an unusual development and one that has been tentatively linked to the potential for U.S. border taxes being imposed by the Trump administration.
What is not in doubt is that this rise in CME stocks marks a major redistribution of "visible" stocks around the world.
There are, of course, plenty of copper stocks we don't get to see at all since they are sitting in the non-exchange statistical shadows.
And a good part of them, it seems, are being vigorously shuffled around Asia as bull and bear attempt to control the copper narrative.
And they are doing so at a time when that narrative is particularly malleable.
Most analysts agree that after several years of oversupply the copper market is transitioning to a state of supply deficit.
Such turning points are notoriously hard to read and even harder to trade. Visible stocks should be a useful tool in gauging the speed of any turnaround in underlying market dynamics.
Both bull and bear know that.
It's just that their ongoing and escalating battle to try and massage the stocks message has rendered the LME part of the tool-kit next to useless for everyone else.
Editing by David Evans