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At the bottom, when does the "Bronze boss" come back?
In February 2019, copper prices rebounded strongly, and Shanghai copper rose from 48,000 to over 50,000. However, since March, the price of copper has begun to fall back, and it seems to be showing a stagnant state. However, as macroeconomic policies continue to strengthen countercyclical adjustments, and Sino-US trade relations ease, macroeconomic sentiment will improve overall, and there will be uncertainty in the copper supply side. The demand gap will be difficult to make up. Copper prices will tend upward in the medium and long term, so it is recommended to increase the long position. Configuration.
Macro-enhanced counter-cyclical adjustment, the economy is expected to accelerate to the bottom
Since 2019, the macro-policy has strengthened the counter-cyclical adjustment, the central bank has continuously lowered the standard, and the Ministry of Finance has accelerated the large-scale issuance of local government special bonds. In January 2019, the social welfare and M2 growth rates first bottomed out, and the new social welfare in February appeared seasonally. Falling back, but in the January-February period, the growth rate of social welfare is still rising significantly, and monetary policy and fiscal policy continue to exert strength, including the Ministry of Finance to introduce new tax reduction and fee reduction measures, and the economy is expected to accelerate to the bottom. Historically, copper prices are highly correlated with the domestic manufacturing PMI, so if the economy improves, then the bottom of the copper price is not far off.
In terms of Sino-US trade relations, the two sides launched the seventh round of trade consultations in February 2019, and made positive progress on specific issues such as trade balance, agricultural technology transfer, intellectual property protection, and financial services. The United States was scheduled to postpone at 3 Measures to impose tariffs on Chinese products on the 1st of the month. At present, the two sides are not far from reaching an agreement.
Increased supply uncertainty increases copper mine interference rate increases probability
In terms of copper mines, the supply of foreign mines has been frequently disrupted recently, and processing fees have rapidly slipped from high 90 to below 80. The focus of the transaction has been refreshed at a new low since three quarters. The market turnover is around $75/ton, and the low is even $70/ Tons of offers. In 2018, the global copper mine interference rate is only 2%, which is at a historical low level. However, the supply uncertainty of copper mines has increased this year, and the increase of the interference rate is a high probability event. Especially in Africa, the supply of copper mines in Congo and Zambia is facing an increase in mineral taxes. Troubled, the Congo’s copper royalties increased from 2% to 3.5%, Zambia’s royalties on mining companies will increase by 1.5 percentage points to 5.5% to 7.5%, and copper prices will exceed $7,500 and $9,000, using concessions. Rates will rise to 8.5% and 10% respectively. In addition, Zambia’s 5% new import tax on copper concentrates has hampered the flow of raw materials from the Congo to Zambia. The first quantum layoffs to deal with Zambia's tax revenue, Vedanta announced that it will cut production at its Nchanga smelter, ERG suspended its Boss mine, and Glencore said it will reduce Mutanda's production.
In terms of refined copper, there were more domestic new smelting capacity in 2019, but the production was mainly concentrated in the second half of the year, and the supply from the feed to the final output was longer, so the impact on supply in 2019 was limited. And since March 2019, large copper smelters, including Jinchuan, Guangxi, will be intensively overhauled. In addition, the overseas Vedanta resumption plan announced abortion, which has an impact on overseas refined copper supply.
In terms of scrap copper, China imported 176,900 tons of scrap copper in January 2019, a year-on-year decrease of 11.51%. Specifically to the metal tons, it was 139,100 tons, a sharp rise of 18.03% year-on-year. Although the “Abolition of Waste Seven” imports were completely banned in 2019, the amount of scrap copper metal rebounded sharply in January, mainly because the proportion of “waste six” increased further, and the copper grade increased significantly (from 58.97% in the same period last year to 78.66%). However, from July 1, 2019, the “waste six categories” will be converted into restricted categories, so the import volume of “waste six categories” is expected to fall sharply in the second half of the year. Moreover, domestic recycling is still subject to many factors such as environmental protection and capital. Therefore, the overall supply of domestic scrap copper will remain tight.
Increased support, consumption should not be pessimistic
In 2019, the planned investment amount of the State Grid was 512.6 billion yuan, an increase of 4.84% compared with the annual completion of 488.94 billion yuan in 2018. This year's fiscal policy is loose, so the investment in power and infrastructure is worth looking forward to. effect. In March, the plan for the scheduling of key air-conditioning enterprises increased by 6.4% compared with the same period of last year. The demand for copper pipes in air-conditioning in the peak season is more optimistic. In February, China's automobile production and sales decreased by 17.4% and 13.8% respectively, and the growth rate dropped sharply. However, the production and sales of new energy vehicles increased by 50.9% and 53.6% respectively. New energy vehicles consume 3-4 times more copper than traditional vehicles, so the rapid growth of new energy vehicles has offset the drag on traditional copper prices. Moreover, considering the NDRC's support for the future consumption of automobiles, copper consumption for automobiles should not be excessively pessimistic.
Low-season inventory growth is not necessarily a decline in downstream consumption
At present, the stocks in the previous period have maintained growth. This is mainly due to the domestic seasonal accumulation effect. However, compared with previous years, the accumulated pressure in the off-season this year is relatively small, so the growth of inventory is hardly a decline in consumption. And after the arrival of the peak season, inventory will return to a downward trend, and low inventory will have a positive impact on copper prices in the future.
Key points and strategic advice
In summary, as macroeconomic policies continue to strengthen countercyclical adjustments, and Sino-US trade relations ease, macroeconomic sentiment will improve overall, and there will be uncertainty in supply end this year, copper mine interference rate will increase, and this year's smelter overhaul The suspension of production is also more frequent than before, and the supply of scrap copper, the gap between supply and demand is difficult to make up, the medium and long-term trend of copper prices is upward, it is recommended to increase the long position.
Editor in charge: Dou Xiaowei
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