I. Trend analysis
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According to the monitoring data of business associations, as shown in the figure above, copper prices have gone through an “inverted V” trend in the past month and experienced a small roller coaster. Throughout this year’s copper trend, copper is now at a lower position in the year. Since reaching its highest position in the year at the end of March, copper prices have fallen more than once, with an amplitude of 8.61%. As of August 6, copper was trading at 46146.67 yuan/ton, up 0.45% from the previous trading day.
According to the current copper futures table of business associations, the spot price of copper in the near future is higher than the main contract price for most of the time. The main contract price is the price of copper in the next two months. The spot price is higher than the main contract price of copper, indicating that people are not optimistic about the future price of copper.
Sino-US trade disputes continue to escalate and the offshore RMB exchange rate against the US dollar breaks the “7″
U.S. President Trump said last week that he would impose more tariffs on Chinese imports and a 10% tariff on Chinese goods worth $300 billion, which, if implemented, could further reduce China’s exports by 2.7% and drag down China’s GDP growth by 50 basis points. China has vowed to fight back to end a month-long trade truce between the world’s two largest economies. The trade war will be a protracted war that will lead to the emergence of our bear market fundamentals in most commodity prices.
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For the first time in more than a decade, China has allowed the renminbi to break through the 7-yuan guaranteed export data against the dollar, a sign that Beijing may be willing to allow the renminbi to weaken further, which may further exacerbate trade conflicts. Trade disputes are believed to weaken economic growth and hit demand for metals, escalating disputes and damaging market sentiment.
Weak terminal demand
Retail sales in the passenger car market fell 16% year-on-year in July from 1 to 4 weeks, significantly lower than the 5% growth rate in June to 4 weeks, according to the CRC data. Recent copper rod, copper pipe, copper sheet and foil processing industry start-up rate last year has declined to a certain extent, especially copper sheet and foil start-up rate dropped by nearly 10%, indicating poor downstream demand. The main reason for the slump in terminal consumption is that the investment in power grid, which accounts for the first proportion of consumption, dropped by 19.3% in January-June compared with the same period last year, and the start-up rate of wire and cable enterprises declined more.
Data from Citigroup Demand Tracker showed that the slowdown in Chinese manufacturing had a particularly significant impact on copper, with copper use in the world’s largest consumer shrinking sharply for the first time since 2015.
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Supply is still tight
Upstream copper supply is still tight, copper processing costs continue to decline, and imports of scrap copper are limited in July 2019. In the second batch of copper scrap policies, the total amount of six kinds of copper scrap import approvals in the second batch was 124,500 tons, which was 48.2% lower than that in the first batch of 240,000 tons. The data showed that the imports of the vast majority of enterprises receiving the approvals were the same as that of last year’s average quarterly imports. However, in view of the implementation of the solid waste import ban at the end of 2020, the classification of resources is still under discussion. The key is whether the brass can be imported or not. There is not much suspense about dividing copper into resource categories. Assuming that brass can not enter the Chinese market, there will be a gap of nearly 300,000-400,000 tons of metal.
In summary, in the case of relatively loose supply, consumption off-season and macro-economy can not support a sharp rise in copper prices, macro-negative, short-term copper prices are not optimistic, and the expected price fluctuation is between 44,000 and 48,000 yuan/ton.