The hottest macro and marginal improvement of supp

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Macro and marginal improvement of supply and demand copper price rise is coming

at the time of the traditional consumption peak season in the second quarter, the market is still controversial about the current periodic rebound in copper prices. In the interview, it was found that the macro and marginal improvement of supply and demand have become recognized as the core factors supporting the rebound of copper prices

macro and fundamentals resonate, and the outlook for the copper market is good.

GU Fengda, head of research and Development Department of Guosen futures, said that since 2019, the pace of tightening monetary policy in major economies in the world has slowed down. Against the background of intensifying trade frictions and geopolitical fluctuations, the global economy has shown signs of decline, and the counter cyclical regulation of domestic and foreign liquidity has boosted financial markets, Commodity prices represented by bulk industrial products have entered a window period of staged rebound

"from the market since this year, the non-ferrous metal plate is uneven in hot and cold, copper and aluminum are tepid, zinc and nickel are booming, and lead is hit hard by cold." Gu Fengda said that as of April 15, the cumulative increase of Shanghai copper futures price was less than 3%, which was "dwarfed" by other industrial metals. However, he believes that after entering the second quarter, copper prices are expected to pick up under the favorable background of the improvement of the macro environment, supply disturbance and the start of consumption

Cao Yang, an analyst at the Dongzheng Derivatives Research Institute, believes that the fundamentals of the copper market will be improved in stages next. The core rookie has recycled 200000 cartons in total. The logic is that the phased slowdown in supply growth is superimposed on the marginal improvement in demand. At the same time, considering the slowdown in the pace of interest rate hike by the Federal Reserve, the phased results of Sino US trade negotiations and the gradual effect of countercyclical regulation of domestic policies, he believes that the macro environment also has positive support for copper prices in the second quarter

according to the interview, it is difficult to rapidly increase production capacity in the short term due to the high initial production capacity investment and long investment cycle of copper mines, while the global demand for copper maintains a stable growth. Affected by this, international institutions and domestic non-ferrous industries have generally been optimistic about the prospects of the copper market since this year

Gu Fengda said that the capacity bottleneck of domestic copper smelting enterprises this year is mainly concentrated in the supply constraints of raw materials such as copper concentrate and waste copper. The capacity release degree of copper smelting enterprises is often dynamically adjusted according to the trend changes of processing fees and copper prices

"it can be said that the level of copper concentrate processing fee is a barometer reflecting the changes in copper mine supply and demand. Generally speaking, when the supply of copper mine is short, the mine takes the initiative in the negotiation with smelting manufacturers, and the processing fee paid will decline; on the contrary, when the supply of copper mine is abundant, the processing fee paid will rise." He said

relevant data show that the minimum processing and refining cost (tc/rc) of China's large copper smelters in the second quarter of 2019 was reduced by more than 20% to US $73 per ton (or 7.3 cents per pound), which is not only lower than the US $80.5 per ton of copper smelting long-term association processing cost in 2019, but also lower than the level of previous years. In response, he said that the recent unexpected reduction in copper processing fees also showed that the global supply of copper concentrate was more tight this year

domestic smelters are busy with maintenance and refining copper is relatively in short supply

according to the prediction of Shanghai Nonferrous Metals (SMM) data, the output of copper concentrate in China in 2019 was about 1.633 million metal tons, an increase of 103000 tons over 2018, with a growth rate of 6.7%. However, from the perspective of copper industry chain, China is the largest copper consumer in the world, and the self-sufficiency rate of copper materials is less than 30%

"due to the small number of domestic large-scale copper mine projects, and the subsequent mining of many projects are faced with many problems such as scattered production capacity, production capacity constraints, low copper grade, the growth space of domestic copper concentrate production is relatively limited, which also causes China's copper market to be highly dependent on foreign markets, and the supply and demand are extremely vulnerable to the impact of foreign markets." Gu Fengda said

Cao Yang said that the growth rate of domestic refined copper production will slow down in April, and the pace of new production capacity is lower than market expectations. It should be noted that the overhaul of domestic smelters in April and may exceeded expectations. At the same time, the disturbance of foreign smelters has not been effectively solved

smm data show that China's electrolytic copper output in March this year was about 751100 tons, with a month on month increase of 4.38% and a year-on-year increase of 5.28%; From January to March, the cumulative output of electrolytic copper was 2.269 million tons, with a cumulative increase of 4.17%, and the growth rate of output was lower than the market expectation

it is understood that most domestic copper smelters have maintenance plans in April, which has a great impact on the overall output. According to the output scheduling of smelters calculated by SMM, China's electrolytic copper output is expected to be 687900 tons in April, with a month on month decrease of 8.41% and a year-on-year decrease of 6.76%; The cumulative output from January to April was 2.8948 million tons, with a cumulative increase of 1.35%

Li Chaoxiang, a researcher at Haitong futures, said that although the market generally expected that the centralized maintenance of smelters in the first half of the year would support TC and reduce the supply of refined copper, according to its research and estimation, the output affected by the maintenance of smelters this year was basically the same as last year. If the copper price continued to rise in the second quarter, it may need to rely more on the support of downstream flexible operation and random switching of consumption data that exceeded expectations

the traditional peak season is approaching, focusing on the recovery of copper consumption

Li Chao told futures that with the arrival of the traditional consumption peak season in the second quarter, the market is still on the sidelines for the strength of domestic downstream consumption and the actual implementation effect of the steady growth policy. The trading logic of copper price may be changing from macro logic to fundamental logic since the second half of last year

"at present, there are about 250000 tons of copper warehouses in the previous period, and they will continue to be destocked in the near future. This year's cumulative height is at a low level since 2016, compared with 2015, so only a few technicians are needed to operate these production lines. This year's destocking speed is also lower than that of recent three years, and the slope and magnitude of inventory decline are relatively small. In the later stage, it is still necessary to continue to observe the domestic destocking speed and the recovery of downstream consumption." He said

Cao Yang believes that the production and sales of domestic air conditioners began to strengthen in March, and the demand for copper in the household appliance industry may improve periodically. At the same time, the decline in the growth rate of automobile production and sales has also narrowed. The rapid development of domestic new energy vehicles will drive the continuous release of copper foil production capacity. The demand of these two aspects is likely to rebound in stages. However, the support of the electricity industry for copper demand may not be seen until the second half of the year

from abroad, copper demand in developed countries may continue to weaken due to the slowdown of economic growth; The growth rate of emerging markets such as Southeast Asia may be stable due to the continuous release of potential demand. He said that domestic demand is expected to improve periodically, because from a macro perspective, we have seen more signals of economic bottoming, superimposed on the improvement of market sentiment, domestic copper terminal demand may gradually improve. On the whole, copper demand is strong inside and weak outside, and structural improvement is on the way

Where will the copper price go in the second quarter under the tight balance of supply and demand

market analysis believes that this year, the global copper market will maintain a "tighter balance" between supply and demand. Although China's copper industry has less pressure in the supply side reform, considering the slowdown in the growth of foreign copper concentrate, the expected rebound in Chinese demand, the low level of global copper apparent inventory and other factors, there are many medium and long-term bulls in the market

Cao Yang believes that the copper price may be stronger in the second quarter, and the target price of the main contract of Shanghai copper is 51000 yuan/ton. However, he said that the possibility of a unilateral trend rise is unlikely. The core logic is that the slowdown in supply growth is phased, and demand is only marginal improvement rather than a significant recovery

Li Chao said that since March, Shanghai copper has always fluctuated in the range of 48000-50000 yuan/ton, and the position and trading volume of Shanghai copper have decreased to a certain extent since the beginning of March. Correspondingly, since March, the non-commercial net position of CFTC has decreased from 32156 to 3014. The non-commercial long position reduction and short position increase make the current net position almost the same, which is reflected in the futures disk, forming a narrow range oscillation trend. Combined with the macro aspect, it is expected that the copper price will maintain a weak oscillation pattern in the second quarter without major interference events

"at present, the supply increment of raw ore in the upper reaches is limited. Although the smelting capacity in the middle reaches is slightly surplus, it is difficult to form a large amount of refined copper supply increment under the restriction of raw ore supply. In addition, the demand in the lower reaches continues to pick up, and it is expected that the copper supply gap will continue to exist in 2019. From the perspective of industrial fundamentals, the global copper market will be a boom cycle in the next 2-3 years. As long as the macro environment does not change significantly, the copper price will be easy to rise but difficult to fall." Gu Fengda said

in terms of the second quarter, he said that the loose expectation of the global central bank's monetary policy will have a positive impact on copper and other bulk commodities. The copper price has strengthened its support below the 50000 yuan/ton level. At present, the improvement of macro and fundamentals has made bears wary. It is also necessary to pay attention to the pace of smelting and overhaul, downstream consumption and domestic and foreign inventory changes

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