April 2022 cable raw materials (copper) monthly report

First, the macro aspect

International aspect,

1.
The US GDP in the first quarter was -1.
4% annualized, far less than the market expectation of 1.
1%.

In terms of sub-items, consumption and fixed asset investment performed steadily, with their combined contribution to GDP of about 3.
1 percentage points
.
The drag came from three sources, one is inventory investment, the other is net exports (especially exports), and the third is government spending, which together drag down GDP by about 4.
5 percentage points
.

2.
The preliminary value of the Markit manufacturing PMI index in the United States in April was 59.
7, a new high since September last year, indicating that production continued to expand, and the preliminary value of the service PMI was 54.
7, compared with 58 in the previous month, reflecting a slowdown in growth, but a sharp increase
in new orders.
Eurozone flash manufacturing PMI for April was 55.
3 vs 56.
5 previously, and preliminary services PMI was 57.
7 vs 55.
6
previously.

3.
The Bank of Japan announced the continuation of massive stimulus measures and pledged to continue unlimited purchases of 10-year government bonds to defend the hidden ceiling of 0.
25%, showing its determination
to focus on supporting a fragile economy.
In addition, the Bank of Japan also maintained its guidance to maintain its interest rate target at current or lower levels
.

Domestically,

1.
In order to improve the ability of financial institutions to use foreign exchange funds, the central bank has decided to reduce the foreign exchange deposit reserve ratio of financial institutions by 1 percentage point from May 15, 2022, that is, the foreign exchange deposit reserve ratio will be reduced from the current 9% to 8%.

2.
The PBOC decided to reduce the deposit reserve ratio of financial institutions by 0.
25 percentage points on April 25, 2022 (excluding financial institutions that have implemented a 5% deposit reserve ratio), and reduce it by an additional 0.
25 percentage points
for urban commercial banks that do not operate across provinces and rural commercial banks with deposit reserve ratios higher than 5%.
This RRR reduction is a comprehensive RRR reduction, releasing a total of about 530 billion
yuan of long-term funds.

3.
Zhu Hong, senior statistician of the Industrial Department of the National Bureau of Statistics, interpreted the profit data of industrial enterprises: Overall, in the first quarter, tax and fee reductions, and multiple measures to help enterprises bail out were taken at the same time, and the profits of industrial enterprises maintained steady growth
.
However, it should also be noted that the increase in external imported inflationary pressure and the spread of the new crown pneumonia epidemic have brought many challenges to the stable development of the industrial economy, and the difficulties in production and operation of enterprises have increased
.
In the first quarter, the profit growth rate of industrial enterprises above designated size fell by 3.
8 percentage points compared with the fourth quarter of the previous year, and the profit differentiation between different industries and different types of enterprises was clear (National Bureau of Statistics).

Second, the market review

In April, copper prices rushed back down, at the beginning of the month by the situation in Russia and Ukraine, European and American sanctions caused energy crisis concerns, London copper twice tested the high above 10,500 US dollars, followed by the Fed's hawkish interest rate hike expectations continue to heat up, the foreign exchange market fluctuated sharply, panic suppressed the collective pullback of non-ferrous metals, as of 3 pm on the 29th, the main 2206 contract of Shanghai copper was reported at 73600 points, a monthly increase of 0.
38% or 280 yuan
.

On the macro front, affected by uncertainties such as the Russia-Ukraine conflict, global commodity inflation and the multi-point spread of the domestic epidemic, economic growth expectations have been cold, market confidence has weakened, and the stock market has fallen sharply, and copper prices have been under pressure
during the month.
Towards the end of the month, the Politburo held a meeting to revive the market, and market confidence was restored
.

In the market, spot copper rose by 320 yuan in April, and the premium rose all the way
.
Shanghai has been in full moon after the implementation of lockdown, and under the influence of the epidemic, transportation is not smooth, and the decline in demand is more obvious
.
In terms of inventory, the domestic continued seasonal destocking, supporting the trend of Shanghai copper, and the premium situation continued, and the good copper premium was 430 yuan / ton
by the end of the month.
Overall trading is weak, waiting for the epidemic to slow down and there are expectations
of recovery.
In terms of import profit and loss, the Federal Reserve is about to raise interest rates hawkishly, Japan maintains ultra-loose monetary policy, the RMB has depreciated sharply, the impact of the foreign exchange market has intensified, and the import profit window has reopened this month, and it is around
600 yuan / ton at the end of the month.

In the short term, copper prices are in a state of high expectations and low reality, copper price dynamics are mainly concentrated on inflation and infrastructure expectations, in reality consumption and exports are still weak to bring some pressure
.
Looking forward to May Day, the Fed's interest rate hike is about to land, with a high probability of 50bp or bring copper prices to a short-term rise, and after the bearish cash, it is expected to usher in a wave of repairing rebound trend in the short term, and the upward pressure is above 74,000
.

3.
Waste market

Shanghai copper rushed back down this month, spot copper rose about 300 yuan / ton compared with last month, scrap copper rose 800 yuan / ton
.
The difference in refined waste is around
1720 yuan.
The advantages of scrap copper end are obvious
.

At the beginning of the month, the market was volatile, the supply of goods was less, the quotation of copper factories was higher in Henan Xinxiang and Hubei, and the purchase price of large households was 200-300 yuan higher than the market price, attracting Linyi Metal City traders to deliver.

The market rose sharply in the middle of the month, and the price of copper scrap continued to rise
.
In order to meet the normal production, copper mills generally raised prices to receive goods, fierce competition, Jiangxi copper mill highest price reported 68,700 yuan / ton, a new high
since October last year.
At the end of the month, the market fell, the market sentiment was sluggish, and the holders covered the goods and sold them, and the trading was light
.
In terms of inventories at copper mills, the overall end of March was low, and inventories picked up in April, but some areas were hindered
by the epidemic.

After the landing of Document No.
40, there were concerns about the VAT refund ratio in Jiangxi, and the output of copper rods did not return to the level of the same period of previous years
.
The copper factory in Langfang area of Hebei Province began to stop production in mid-March due to the impact of the epidemic, and the start of work in Hubei increased significantly due to production requirements; Copper mill processing fees in areas without policy subsidies have generally risen
.
In addition, the foreign trade in Yuhuan area is light, resulting in poor orders for brass rods, Jiangxi new dry manufacturers environmental protection shutdown, a large enterprise in Taizhou Luqiao this year to re-produce brass rods, more favored Zhejiang Ningbo imported copper, the price has a certain advantage
.

4.
Inventory

Domestically, the inventory accumulation period has ended, has begun to dematerialize ahead of schedule, and is expected to soon fall to a historically low level again, supporting copper prices
.
Exchange inventories were the first to peak and decline, and the dematerialization rate was slightly faster than expected, while bonded port inventories also began to fall
recently.
As of March 25, the latest inventory of domestic exchanges was 102055 tons, compared with 129506 tons last week, down 27,451 tons
from the previous week.
As of March 25, the national inventory (including bonded areas) was 451,400 tons, down 52,500 tons from the previous week, of which the bonded zone fell by 28,800 tons, and the non-bonded zone fell by 23,700 tons, and the total inventory was 248,500 tons lower than the same period last year, the lowest value
in the same period in nearly six years.

Overseas, LME inventories remain low, and although there has been a slight recovery recently, they remain low
overall.
As of March 26, the latest inventory of LME London copper reported 80,550 tons, down 50 tons, or 0.
06%,
from the previous trading day.
The decline in overseas inventories may be due to the reduction of Russian copper supplies due to increased Western sanctions, and the overhaul period of European copper smelters under soaring energy prices
.
On the whole, the global inventory level is still low, and has ushered in the seasonal destocking stage, to a certain extent to give copper price support, short-term prices are still likely to
strengthen.

5.
Industry news

1.
Zijin Mining Group has signed an agreement to acquire 19.
9% of Xanadu Mining Company for $0.
04 per share and 50% of the shares of Khuiten Metal Company, a subsidiary of
Xanadu, for US$35 million.

2.
The Afghan Ministry of Mines said that Afghanistan has signed an agreement with China Metallurgical Corporation that China can continue to operate the largest Aynak copper mine project
in Afghanistan.
The mine is said to be one of the largest untapped deposits in the world, with copper resources
worth up to $100 billion.

3.
The Chilean Copper Council (Cochilco) released a report that it is expected that the world refined copper market will have a gap of 104,000 tons in 2022, putting downward pressure
on the inventories of global metal exchanges.
The commission expects a supply surplus of 329,000 tonnes
in 2023.

4.
Ivanhoe, a Canadian mining company, said it produced a new production record of 55,602 tonnes of copper at the Kamoa-Kakula copper complex in the Democratic Republic of Congo (DRC
) in the first quarter of this year.
Copper production hit a record high
of 19,605 tonnes in March.

5.
The latest report released by the World Bureau of Metal Statistics (WBMS) shows that the global copper market has a shortage of 83,000 tons in January-February 2022, compared with a shortage of 479,000 tons in 2021
.
Copper production in January-February 2022 was 3.
44 million tons, a year-on-year increase of 2.
8%; Refined copper production from January to February was 4 million tons, up 0.
7%
year-on-year.
Copper consumption in January-February 2022 was 4.
081 million tons, a year-on-year increase of 4.
7%.

China's copper consumption in January-February 2022 was 2.
14 million tons, a year-on-year increase of 3.
3%.

China's imports of copper ore and its concentrate in March were 2,184,256.
66 tonnes, up 5.
37% month-on-month and 1.
09%
year-on-year.