Interim supply and demand margins change, bad copper prices rise hard to change - Metallurgy Trends - Luoyang Wanle Electrical Equipment Co. , Ltd 


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Interim supply and demand margins change, bad copper prices rise hard to change

  • 2017-11-25 14:42:37 Luoyang Wanle Electrical Equipment Plant 1148
  • After a sharp downward revision in mid-early November, copper prices at home and abroad rebounded after November 20, with Shanghai copper 1801 contract rebounding more than 2%, and LME copper rebounding nearly 2% in three months. The main driving force for the short-term copper price rebound is inventory transfer, the weakening of the US dollar and a rebound in inflation expectations. In the medium term logic, the double-dip in real estate and infrastructure investment growth means that demand is just beginning to weaken, and the rebound in copper prices is only a rebound in the medium term.

    Inventory transfer expects replenishment from global copper dominant inventory, a new round of inventory transfer seems to be in progress. Data show that as of November 22, LME copper stocks fell to 226,300 tons, down 6.6% from the same period last year, and LME copper stocks reached a year-high of 354,000 tons. Copper stocks in the previous period continued to rise, rising to 162,800 tonnes as of November 17, the highest level since September 22, a 21% increase over the same period last year. Meanwhile, the COMEX copper library rose to 210 thousand tons in November 21st, a 153% rise over the same period last year.

    From the historical inventory changes, LME copper stocks transferred to Shanghai, often accompanied by a rebound or rise in copper prices, the market believes that China by increasing import replenishment.

    From the point of view of import profit and loss, copper import loss has obviously converged in three months since October, and the window period of import profit appears from time to time. However, with the start of late November, Shanghai copper rebounded more than LME copper price, import losses expanded again, November 21 import losses expanded to 1,050 yuan / ton. This means that the stock transfer cycle will be very short, which will inhibit the rebound of copper prices.

    In the long term, the US dollar and copper prices show a highly positive correlation. The long-term and short-term spreads on U.S. Treasury bonds narrowed sharply in November, the prospects for economic recovery weakened, inflation rebounded less than expected, and the pace of interest rate hikes by the Federal Reserve slowed. The Fed's tightening pace is less than expected, boosting the rebound in copper prices.

    In addition, since the third quarter, the rebound in international crude oil led to a rebound in global inflation expectations, while copper prices and inflation are positively correlated, so copper prices have also been supported by the rebound in oil prices.

    From the supply side, the overhaul capacity of domestic copper smelting enterprises in October and November is less. The overhaul of Jiangxi Copper Industry (600362, stock bar) in October affected the output of 0.11 million tons, and only Hengbang Copper Industry overhaul in November, the output impact can be neglected. In addition, the 150,000-ton electrolytic copper project of Huludao Hongyue North Copper Industry was commissioned in November, and the 100,000-ton electrolytic copper project of Jiangxi Hengfeng Feinan Environmental Protection Technology Co., Ltd. was completed and put into operation (annual recovery and disposal of 300,000 tons of scrap metal). It is expected that the copper output will continue to rise in November.

    Demand end by seasonal off-season and real estate cooling drag, the copper downstream only household appliances copper pipe demand and new energy vehicles copper foil demand is relatively stable, cable enterprises and other infrastructure parts of the demand for copper rods and wires significantly weakened. Research found that some cable companies in late October orders fell 20%. From January to October, 41.26 billion yuan was invested in the power grid. According to the plan of investing 587.1 billion yuan at the beginning of the year, 174.46 billion yuan was invested in November and December. Therefore, grid investment will continue to slump.

    Overall, demand-side indicators, such as real estate investment, infrastructure investment growth continued to decline, while export growth slowed to 6.9% in October, implying that both domestic and foreign demand growth faces the risk of further decline. As imports rebound and output rebound, supply margins change better, copper prices rebound or in the mid-term roof fall.

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