Copper Weekly Review: Terminal demand performed well, copper prices fluctuated at a high level this week (week 50)

Abstract: Copper concentrate processing fee TC remained low, and China's copper imports fell month-on-month, but it has set an annual record. Terminal market demand such as automobiles performed well. The European Central Bank increased monetary stimulus to boost the market. Copper prices fluctuated at a high level this week.

1. The trend of domestic spot copper prices this week

In the week of December 11, the domestic spot copper price fluctuated at a high level. The average price of copper on Changjiang Nonferrous Metals Net 1# reported 57338 yuan/ton, an average daily increase of 154 yuan/ton, and a weekly increase of 1.34%; the average price of the previous week was 57360 yuan/ton, a decrease of 22 yuan/ton compared with last week. The chain fell 0.04%.

Copper concentrate processing fee TC remains low. Miners and smelters are negotiating on processing and refining fees in 2021, and supply remains tight. According to customs data, the arrival of copper concentrate in November was 1.83 million tons, an increase of 8.3% from the previous month, but a year-on-year decrease of 15.1%. Due to the closing of the arbitrage window, China's copper imports in November fell for the second consecutive month, but they increased by 16.2% year-on-year. Imports from January to November continued the annual record set in just 10 months.

CRU analysts said that due to the high imports in the past six months, the decline in copper imports is within expectations, and China's demand for copper is still rising every month. According to data from the China Automobile Association, both auto production and sales in November hit new highs during the year. New energy vehicles continued to develop at a high speed. In addition, cable companies continued to operate at a high level, terminal demand performed well, and macro optimism promoted copper prices.

2. One-week trend of copper futures prices

CCMN data shows that Lun Copper fluctuated strongly this week. The average price of LME copper in the first four trading days was reported at 7749.5 US dollars/ton, an average daily increase of 28.75 US dollars/ton; last week, the average price was reported at 7671.6 US dollars/ton, an increase of 1.02% from the previous month.

The prospects for China's economic recovery are "stable", industrial production has recovered steadily, and market demand continues to pick up. Institutions are optimistic about China's economic development prospects. The performance of the US job market in November was unexpectedly weak, and the market increasingly expected the US to introduce more fiscal stimulus measures. The epidemic prevention and control measures have affected the recovery of the European economy. The European Central Bank has increased the scale of monetary stimulus to cope with economic uncertainty and boosted macro optimism.

Data shows that Shanghai copper has a strong trend this week . The average weekly settlement price of the current month contract was 57304 yuan/ton, an average daily increase of 102 yuan/ton; the average price of the previous week was 57126 yuan/ton, an increase of 0.31% from the previous week. This week, copper stocks in Shanghai fell again, reducing 15691 tons to 82,092 tons, a decrease of 16.05%.

3. London Copper Week Inventory Situation

this week's copper inventory continued to go down, with a cumulative decrease of 3350 metric tons to 146,325 metric tons, a cumulative decline of 2.24%.

Hot finance at home and abroad

Domestic side:

• Data from the National Bureau of Statistics show that in November, industrial production recovered steadily, market demand continued to pick up, and industrial product prices continued to rise. From a month-on-month perspective, the PPI went from flat last month to an increase of 0.5%. From a year-on-year perspective, PPI fell by 1.5%, and the rate of decline narrowed by 0.6 percentage points from the previous month.
• According to the statistical analysis of the China Automobile Association, in November 2020, automobile production and sales continued the growth momentum, and both production and sales reached new highs during the year. From January to November, the decline in automobile production and sales narrowed to below 3%. With the continued improvement of the domestic economic environment and the promotion of consumption policies, market demand will continue to recover.

International aspect:

• On the 10th, the European Central Bank decided to keep the dominant interest rate unchanged, and at the same time announced the expansion of the emergency asset purchase plan from the previous 1.35 trillion euros to 1.85 trillion euros, and bond purchases to continue at least until March 2022 to maintain easy financing condition.
• According to data released by the US Department of Labor, the number of people applying for unemployment benefits for the first time in the United States last week was 853,000, an increase of 137,000 from the revised figure of 716,000 the previous week. With the recent slowdown in employment growth, the number of first-time jobless claims remains high.

Copper market news of the week

• Chile's state-owned copper company (Codelco) said on Thursday that it has reached a preliminary salary agreement with a union at the Radomiro Tomic copper mine. During the outbreak of the new crown epidemic, the company basically maintained production through layoffs, adjustments to the schedule, and temporary shelving of projects during the peak of the epidemic.
• According to data from the General Administration of Customs, China's copper imports fell for the second consecutive month in November, reaching a six-month low, because the favorable price arbitrage window was closed, making the attractiveness of importing metals from overseas and bonded warehouses less attractive. From January to November, China's copper imports reached 6.17 million tons, a record high.

Outlook for copper prices

A few days ago, Fitch raised its forecast for global economic growth for this year and next. Starting from the middle of next year, with the introduction of vaccines and the relaxation of the blockade, the global economic recovery will be more stable. Affected by the restrictive measures taken to contain the epidemic, the labor market data recently released by the United States is generally poor, and the debate over spending plans and COVID-19 assistance continues. The European Central Bank lowered its economic growth forecast for the euro zone in 2021 from 5% to 3.9%. The escalation of epidemic prevention and control will impact the economy in the fourth quarter, but it has once again increased the size of its emergency asset purchase program to help the euro zone get rid of a double-dip recession .

In the context of the spread of the global epidemic, China's economic performance has exceeded expectations, and this year is expected to become one of the few economies that have achieved positive economic growth. The Bank of Communications predicts that the growth rate of China's domestic consumption will rebound to about 13% next year. There is a high probability that copper mine production will improve in 2021, and profit recovery will promote the resumption of production from previously suspended projects, but the current supply remains tight; the current inventory is generally low, and the annual target for domestic power grid investment has not been completed. Situation: There are differences in the current research on refined copper production. In addition, the increase in scrap copper inflow may put pressure on it. Copper prices are expected to fluctuate at a high level next week.