China's copper price fluctuates in a range and is expected to test new highs again
In February 2021, copper prices rose strongly, breaking through multiple key nodes quickly, and hitting a 9-year high.
The speed of vaccination has accelerated, the high of newly confirmed cases has dropped significantly, and the epidemic situation has improved. At the same time, the Federal Reserve maintained its loose monetary policy. The prospects for a new round of fiscal stimulus in the United States were clear. The market's expectations for economic recovery and inflation to pick up accelerated, and non-ferrous metals, crude oil and other commodities benefited.
In terms of supply and demand, the transportation of copper ore in South America was affected by severe weather and the shipment was blocked. The spot TC of copper concentrate fell to a low of US$40/ton, which intensified the tight supply. Although the maintenance of the smelter was reduced, the production schedule at the beginning of the year was not high. Under China's "New Year's Day" policy, processing and terminal consumer companies resume work faster than in previous years, and orders for electronics, home appliances, automobiles and other sectors are sufficient, and consumption is weaker than expected. The accumulation of stocks around the Spring Festival in China is lower than that of the same period in previous years, and LME stocks are at a low level. The fundamentals and the macro bullishness formed a resonance, and the market was bullish.
For March, the US $1.9 trillion fiscal stimulus is expected to land, and consumption will be released quickly. At the same time, there is a demand for replenishment in the United States, the economy will be repaired at an accelerated rate, and the inflation transaction logic will continue. However, the rapid and obvious rise in long-term U.S. bond yields will increase the volatility of highly valued assets, and it does not rule out the inflow of funds to the United States or the advancement of expectations of global monetary policy margin tightening, bringing global systemic risks.
In addition, the U.S. economy performed better than Europe, and as U.S. bond yields climbed, the U.S. dollar is expected to fluctuate strongly at the bottom, and its impact on copper prices is neutral and bearish. In terms of supply and demand, as the price of copper continues to rise, the support for the price of copper has gradually weakened, and it is not ruled out that it will turn away from the trend. High copper prices inhibit new orders from downstream, and the price difference of refined scrap is at a high level. The replacement effect of scrap copper has been significantly enhanced, which has an impact on refined copper consumption. The delivery of copper mines in South America is gradually improving, and the shortage is expected to ease, but there is still uncertainty about the extent of improvement.
In general, copper prices are still in an upward trend, but high fluctuations are expected to increase. Shanghai copper may fluctuate in the range of 63,000-70,000 yuan/ton, and Lun Copper’s 9,000-9,600 US dollars/ton range and test new highs again.
