The demand is optimistic about supporting the rise of copper prices to new highs. Insiders: be alert to the risk of falling

Copper prices have risen since the second quarter of last year. After a brief period of consolidation at the beginning of this month, a new round of surge began after the holiday. The current quotation has hit a new high in the past ten years. The fundamental reason for the rise in copper prices comes from factors such as downstream demand stimulus, supply shortages, and fiscal policy stimuli from overseas countries.

After experiencing the daily limit of all 12 Shanghai copper futures contracts listed on the domestic market on February 22, the copper market remained enthusiastic on the 23rd. According to Zhuo Chuang Information, the current domestic spot copper transaction range is 67420-67480 yuan/ton, which continues to rise compared with the previous price. 270 yuan/ton.

At the same time as the price of copper is soaring, the concern about whether to fall after the high level has also become a topic of concern to the market. Analysts believe that in the short-term, when the fundamentals of supply and demand have not changed significantly, the price of copper has soared, and it is necessary to be alert to the risk of rising and falling. From the perspective of downstream copper processing enterprises, more small and medium-sized enterprises will resume work in early March, and the ability to accept the current copper price may become a new factor in the domestic copper price market game.

Copper prices rose to a 10-year high

On February 22, the domestic futures market opened a large area of ​​red, among which the main contracts of Shanghai copper and international copper futures have daily limit. The market continued on February 23, and the Shanghai copper surged and fell within the day, with the highest futures price reaching 68790 yuan, but the overall continued strength, closing up 2.83%. The trend of international copper futures converged, with an increase of 3.34%. In addition, Lun Copper broke US$9,300/ton.

In the eyes of business people, good demand support is an important reason for the high copper price. Staff from the Securities Department of Jiangxi Copper (600362.SH) said that from the demand side, downstream new energy and new infrastructure are in strong demand, including breakthroughs in the development of epidemic vaccines, which will accelerate the release of demand in this area and form price support. Secondly, the current tight supply of mines and the aggressive fiscal policy of the United States have led to the current high copper price due to various comprehensive factors.

Insiders of Tongling Nonferrous Metals (000630.SZ) also said that from the company's perspective, the consumption situation in the back-end and downstream is optimistic, especially the current export situation and China's capacity supply are also relatively optimistic, and the export of refrigerators, color TVs and electromechanical products is improving. . According to his disclosure, benefiting from the strong demand for downstream orders, the copper processing business remained in production during the Spring Festival this year.

However, with the rise in copper prices, industry analysts believe that the market's bullish mentality is not indestructible. On the supply side, through communication with smelters and traders, although the external quotations of the holders are in a state of flat to premium, the actual transaction price has reached a discount, slightly lower than the futures price, and the holders have a discount of 30 yuan/ Tons of shipments to facilitate transactions.

Industry company performance and share price benefit both

This round of copper price rises inherited from last year's high, and the performance of the industry companies has been significantly boosted under the industry's high boom. According to the State-owned Assets Supervision and Administration Commission of Anhui Province, the controlling shareholder of Tongling Nonferrous Metals-Tongling Nonferrous Metals Group Co., Ltd. exceeded its monthly sales revenue and profit plans in January and achieved substantial year-on-year growth, increasing by 74.91% and 100.98% respectively.

Among them, the key enterprise Ecuador's Mirador Copper Mine's copper concentrate output completed 142.2% of the monthly plan. The output of copper cathodes by Jinguan Copper Branch and Jinlong Copper Co., Ltd. exceeded 1068 tons and 300 tons respectively. The completed volume of chemical products exceeded the plan by 36.4%. Anhui Tongguan Copper Foil Company completed 112% of the plan. The sales volume of high-end copper strip products of the Copper Crown Grisai Company increased 187.5% year-on-year.

According to insiders of Tongling Nonferrous Metals, Jinguan, Jinlong, Copper Foil, and Grisell are all within the scope of the merger of listed companies. Most of the output of chemical products comes from listed companies, and Mirador Copper Mine has not yet been injected into listed companies.

It is worth noting that the interviewed business people all said that the rise and fall of copper prices are directly related to the performance of companies in the industry. Benefiting from the rise in copper prices, performance is expected to exceed expectations. Zijin Mining (601899.SH) released its 2020 annual report performance forecast at the end of January, saying that benefiting from factors such as the rising volume and price of mineral copper, it is expected to make a profit of 6.45 billion to 6.65 billion yuan in 2020, and profit will increase by 50.56%-55.23% year-on-year.

In terms of stock prices, benefiting from the good performance expectations brought about by the rise in copper prices, the stock prices of related listed companies have risen sharply. After Jiangxi Copper closed up 8.27% on the last trading day before, it recorded a daily limit on the first trading day of the Ox Year on February 18 , Closed at 30.32 yuan on February 23, an overall increase of 44.90% in the past 30 trading days; Tongling Nonferrous announced on the evening of February 22 that the stock price change announcement, and the deviation of the closing price of the last three trading days reached 24.76%. . On February 23, the company's stock price closed at 3.20 yuan, an increase of 5.26%.

The market outlook needs to be cautiously optimistic

For the current state of high prices, the interviewed companies and analysts are cautiously optimistic. Insiders of Tongling Nonferrous Metals also believe that there is a risk of volatility, but in the case of good demand, copper prices are expected to be supported. Jiangxi Copper also told reporters from the Financial Association that there is definitely a risk of rising and falling. The price will not always be high or low. Historically, it has reached a high price of 80,000 per ton, and it also fell to 30,000 early last year. The level of itself fluctuates.

There are factors supporting the demand side, but in the short term, the crazy increase in copper prices after the Spring Festival is largely due to capital speculation, which may deviate from the fundamentals. "There are not so many orders after the year, and it is not in a state where stocking is particularly needed. The current high price also reduces the enthusiasm for stocking and purchasing."

It is understood that from the recent communication with fundamental businesses, copper processing has not yet fully resumed work and production, especially for small and medium-sized enterprises that may resume work after the fifteenth day of the first month. Even for copper processing enterprises that have already produced it, it is currently In an obvious wait-and-see state.

Take *ST Xinke, which is mainly engaged in copper processing business, as an example. The company's profits mainly come from processing fees. Generally, it purchases raw materials based on customer orders. There is not much copper inventory and will not carry out a large amount of stocking.

Take the most common downstream product copper rod as an example. From raw materials to copper rod output, the company’s processing fee may be about 1,000 yuan, and a little less is about 700 to 800 yuan, plus costs such as labor and equipment loss. The stocking risk is relatively high, and the profit level is difficult to absorb the pressure of the sharp increase in the cost of electrolytic copper. The market generally focuses on short-term cautious operations.

As for the market outlook, the downstream operating rate will be higher by March, and the current high copper prices will face more challenges. However, the possibility of a sharp correction is unlikely. The center of gravity of copper prices will still move up significantly throughout 2021, continuing the trend in 2020. The center of gravity of annual trading is expected to sprint to the front line of 65,000 yuan/ton.