Copper price is expected to increase recently

Source: China Statistics Bureau, Huatai Great Wall Institute (Shanghai)

LME copper prices continued for 3 months in September, and continued to rise in October and November, and this week reached a record high of 8,965 US dollars / t. The market is generally expected to increase from the average of 8,000 US dollars this year to an average of 10,000 US dollars next year. Although the medium and long-term rising trend is confirmed, the supply of copper prices has increased in the last two months. The seasonal decline in consumption has led to a gradual increase in pressure.

Processing fees rose, supply of ore increased, and supply of refined copper rose. The increase in global copper ore processing fees has increased the profitability of smelters. It is clear from the customs data that China’s copper concentrate imports surged in September and it is believed that it will continue to maintain high levels in October. After the shortage of copper supply has reached its limit, supply has become loose and supply has increased. And, at the end of September, STERLITE in India, the ninth-largest copper smelter in the world, was shut down. The plant has an annual production capacity of 334,000, accounting for more than half of India's total production. The smelter needed to reduce the amount of copper concentrate to zero, and the original inventory or orders may be more likely to ship, the market supply of copper concentrate even more. In the later period, although the supply shortage of ore is an eternal topic, the short-term centralized supply will increase the production of refined copper. Of course, with regard to the smelter's attitude that late processing fees may return at any time, currently imported copper concentrates may not be immediately reflected in output, and smelters may prepare raw materials for storage. The National Bureau of Statistics announced that the domestic refined copper production in October was 400,000 tons, and the overall output recovery trend has already taken shape. In addition, as an affiliated product of smelting, the price of ** has recently risen, which has even led to an increase in the operating rate of smelters. In the latter part of the year, the last two months of this year did not push the smelters down the important factors of production, and each smelter is stepping up to complete the planned production this year, then the smelter will at least maintain the current production, and is expected to increase, for the price increase There is a certain inhibition.

From the end of the year to the end of the year, seasonal factors contributed to a drop in consumption. The supply of concentrates increased, and the supply of copper and zinc increased slightly. In terms of demand, Jin Jiuyin is affected by many factors such as weather. In the last two months of the year, except for the automotive industry, consumption in various industries such as air-conditioning, wire and cable, and real estate will fall. In September, domestic wire and cable production reached 2.44 million kilometers, an increase of 29.6% year-on-year. October output was 2.439 million kilometers, an increase of 41.6% over the same period last year. However, there has been a slight decrease in the chain. In October, the operating rate of wires and cables in Jiangsu and Zhejiang was only 78%, which was significantly lower than the level of 85% in September. Domestic long vacations have made businesses take more or less vacations, and production has fallen. However, some enterprises in Jiangsu and Zhejiang are restricted by the increase in operating rate due to power restrictions. In addition, after the price of copper continued to rise, the purchase volume of consumer companies was suppressed. Purchasing on-demand daily, inventory relative decline. Although there are not many holidays in November and December, it is difficult for the operating rate and the number of orders to increase significantly because of the cold weather. This year, the country’s total investment in power grids is lower than last year. From the long-term perspective of smart grids, China’s wire and cable demand continuity has no problem. Judging from the research situation, the Jiangsu and Zhejiang wire and cable factories in October are full of confidence in the outlook for the next year, resulting in seasonal adjustment after October, and the order volume will drop. In terms of the air conditioning industry, it is undoubtedly one of the most dazzling points in the domestic copper consumption industry. Benefiting from the combined effects of home appliances to the countryside, trade-in replacements, and rebuilding of inventory, in the context of good demand in the previous period, inventory synchronization increased and output demand growth was stronger. After the summer, the sales volume dropped significantly, but the inventory remained low. After the summer heat, demand sales decreased. Although it is expected in the harsh winter today, sales in the northern region will be more difficult to increase, and sales in the south will be difficult to reverse. Expected sales will continue to decrease in the second half of the year. However, the total volume of air-conditioning sales this year is expected to exceed 85 million tons, an increase of 30%. At the same time as the surge in sales, air-conditioning inventory remained low. From the point of view of the ratio of inventory to consumption, this amount is mostly higher than the ratio of production to consumption this year, that is, inventory remains low. This shows that the increase in sales directly affects the output, so the amount of copper used in the household appliance industry this year is relatively large. In the later period, the amount of copper used in household appliances will fall due to seasonal impact this year, but the total base will still support consumption.

On the whole, during the last two months of this year, supply gradually increased and consumption fell. Copper's global supply gap may narrow slightly during the year. From the perspective of other metals, as of the end of the third quarter of this year, there was a supply gap in the world for copper, nickel and tin. On the other hand, there was still no excess supply of aluminum and lead. Among them, the copper supply gap is slightly smaller than nickel and tin. Zinc is the best variety with oversupply as the proportion of consumption, and market pressure is greater. In the later period, the reduction in copper stocks is relatively flat, and the copper supply gap may narrow at the end of the year.

In addition to fundamental factors, the financial strength may weaken during the year. Although the Fed indicated that it plans to further acquire 600 billion U.S. dollars of long-term U.S. Treasury bonds before the second quarter of 2011, after this news, the performance of China and the EU is not the same. The People's Bank of China raised the deposit reserve ratio by 0.5%, and the market is expected to increase interest rates. The European Union even condemned the behavior of the United States and believed that it was accelerating the pace of global inflation. The U.S. dollar index recently turned heads upwards, and its pre-promotion of metal power is weakening. In addition, from the end of the year to the end of the year, there has been a demand for profit taking by all parties, and the assessment believes that the strength of funds will be weakened during the year.

Taken together, the seasonal correction of consumption, the general increase in supply, metal prices to support the fundamentals weakened. And this wave of rising prices since September has been too continuous and lacks a consolidation phase. Then the market outlook, the end of the year with the basic situation, the strength of capital to promote the weakening, copper prices are expected to appear reasonable correction market.