China Copper Weekly Review: Copper prices fall from a high level this week (Week 9)

Supply in Chile and Peru will resume, and the tension will be eased. The actual start of consumption in the current market has been suppressed. No obvious replenishment behavior has been seen. The continuous rise of the US dollar index and US bond yields constituted pressure, and the copper price fell from a high level this week .

1. The trend of domestic spot copper prices this week

In the week of March 5, the domestic spot copper price dropped from a high level. The average price of 1# copper was reported at 66672 yuan/ton, with an average daily drop of 740 yuan/ton, and a weekly drop of 5.40%; the average price of the previous week was reported at 68280 yuan/ton, a decrease of 1608 yuan/ton compared with last week, and a month-on-month drop of 2.36% .

Chile's copper production in January fell by 0.7% year-on-year. Chile's national copper company Codelco's copper production surged, but the world's largest copper mine Escondida's copper production fell; Peru's metal mining industry fell by 7.12% in January, of which copper fell by 7.6%. Chilean ports have returned to normal and the state of emergency in Peru has been lifted. Analysts expect a large number of ships from Chile and Peru to arrive at Chinese ports starting in March, and the tight supply situation will be eased.

Previously, prices rose too fast, and rising production costs inhibited the start of actual consumption. The Shanghai Futures Exchange's inventory continues to accumulate, and there is still greater pressure to destock. Recently, due to the increase in the price of raw materials, some downstream companies feared the high to reduce the operating rate. There has not been any obvious replenishment behavior, and the prices of various home appliances such as air conditioners have increased. The agency said that some of the fundamental factors supporting industrial metals began to fade, and the macro atmosphere disturbed the market, and copper prices fell from their highs this week.

2. One-week trend of copper futures prices

Data show that this week the center of gravity of Lun Copper has moved down. The average price of LME copper in the first four trading days was US$9003.5/ton, an average daily drop of US$102.75/ton; the average price last week was US$9243.4/ton, a month-on-month drop of 2.60%.

China's manufacturing industry has remained above the line of prosperity and decline for 12 consecutive months, but its activity has declined, and the pace of expansion of production and demand has slowed. Manufacturing activities in Europe and the United States have also maintained an expansion trend. The good manufacturing conditions have eased the economic impact of the blockade measures. The global vaccine is accelerating, and economic recovery is expected to drive demand recovery. However, the U.S. dollar index and U.S. bond yields have continued to rise recently, and the Fed has not given a "rescue" signal, which has put pressure on the commodity market.

The trend of Shanghai copper was weak this week. The average weekly settlement price of the current month contract was 66710 yuan/ton, an average daily drop of 668 yuan/ton; the average price of the previous week was reported at 67864 yuan/ton, down 1.70% from the previous week. Copper inventories in Shanghai continued to climb this week, increasing by 15067 tons to 163,025 tons, an increase of 10.18. The cumulative increase in the past five weeks reached 144.91%.

3. Lun Copper Week Inventory Situation

Lun's copper stocks continued to rise this week, with a cumulative increase of 2,800 metric tons to 79,025 metric tons, a cumulative increase of 3.67%.

Fourth, hot finance at home and abroad

China:

1. According to data from the National Bureau of Statistics, the manufacturing PMI in February was 50.6%, which was higher than the critical point, down 0.7 percentage points from the previous month, and remained above the prosperity and decline line for 12 consecutive months. my country's economy as a whole continued to expand.

2. The economic recovery in 2020 will be better than expected, and the annual GDP will grow by 2.3%. The government work report stated that the main expected target for development in 2021 is to increase GDP by more than 6%.

International aspect:

1. The final value of the Eurozone manufacturing PMI in February was announced at 57.9, a new high since February 2018. The previous value was 57.7 and the expected value was 57.7. The continued expansion of manufacturing in the Eurozone is clearly helping to offset the weakness in many consumer-facing industries.

2. The US Manufacturing ISM Purchasing Managers Index in February increased to 60.8 month-on-month, the highest in three years since February 2018, with an expected value of 58.6 and a previous value of 58.7. It has been expanding for 9 consecutive months, and the price index hit the highest since July 2008.

Five, copper market news of the week

1. Rio Tinto and Mongolia reached a new agreement to expand the Oyu Tolgoi copper-gold mine in the Gobi Desert. Underground expansion is its most important growth project. After completion, the mine will produce 480,000 tons of copper per year from 2028 to 2036.

2. An executive of Southern Copper in Peru revealed that the company is advancing the development of the Chancas and Michiquillay projects worth US$5.4 billion because China’s demand and limited supply will help boost global copper prices.

6. Outlook for the copper price market outlook

The market's expectations for the global economic recovery have increased. With the continuous advancement of vaccines, the haze of the epidemic in Europe and the United States has continued to weaken. The European Central Bank said that trade has almost returned to the level before the epidemic and that it can remain optimistic about the economic outlook in the second half of the year. However, the four consecutive months of contraction in the service industry have brought the Eurozone economy into a second recession, but the recession has slowed down. The US stimulus plan continues to advance, but the job market is mixed and has not yet recovered from the impact of the epidemic. The Fed said it may not be able to restore full employment within the year.

China's economic growth target for this year is set at more than 6%, which will steadily increase bulk consumption such as automobiles and home appliances, and increase charging piles and other facilities. According to data from the Passenger Association, the cumulative retail sales of passenger vehicles in the first two months increased by about 71% year-on-year. The China Automobile Association predicts that the sales of new energy vehicles will reach 1.8 million this year. The terminal market demand will be more positive in the future, and the peak season consumption expectation in the second quarter still exists, but the macro atmosphere is uncertain. It is expected that copper prices will continue to fluctuate next week.