Copper market demand accelerates recovery The consumption season in the second quarter is still expected

Recently, the spread of the overseas epidemic has triggered concerns about the global economic downturn, the world's major financial markets have fluctuated sharply, risk assets have fallen significantly, copper prices have also fallen sharply, and London copper once fell below the cost line of 5500 US dollars / ton support
.
However, as domestic demand gradually improves, copper prices are expected to recover
from low levels.

At present, it is difficult to effectively control the overseas epidemic in the short term, and Japan's service sector activity contracted at the fastest pace in nearly six years in February, and more negative effects will appear
in the future.
Global trade will also fall significantly, and it will be no less than the impact
of trade frictions.
The emergence of the epidemic will increase the downward pressure on the global economy, and the IMF lowered its global economic growth forecast to 3.
2% compared to 3.
3% previously, and said that it may reduce the global economic growth forecast in the next global economic outlook, and the overall market sentiment is pessimistic
.

In terms of fundamentals, due to the impact of sulfuric acid expansion in February, some smelters were forced to reduce production or overhaul, resulting in electrolytic copper production falling to 683,100 tons
in February.
However, the impact of the epidemic on the upstream of the copper industry chain is significantly smaller than the impact on the downstream, and the production time and operation of smelters and processing enterprises do not match, resulting in an oversupply of electrolytic copper and a significant increase
in inventory.
In February, the resumption of work of copper enterprises was delayed, the arrival of personnel was insufficient, terminal demand was weak, and the lack of orders led to the operating rate of copper enterprises being significantly lower than the level
of previous years.
The impact of the epidemic is expected to exceed 200,000 tons of global copper demand this year, and the global copper market supply and demand balance will shift from a small shortage to a small surplus
.

With the effective control of the epidemic and the acceleration of the resumption of work, the start of copper processing enterprises in March rebounded
significantly month-on-month.
In March, the operating rate of copper pipe enterprises rose by 37.
83 percentage points month-on-month to 76.
89%, the operating rate of fine copper rod enterprises rose by 27.
71 percentage points month-on-month to 53.
58%, and the operating rate of wire and cable enterprises rose by 31.
4 percentage points month-on-month to 66.
08%.

With the strong support of the government, the resumption of work in the whole country (except Hubei) has basically reached the level of previous years, and then the pace of production will be accelerated to catch up with the previously lost progress
.

At present, the domestic epidemic is nearing its end, and the subsequent Hubei region will gradually relax traffic control and start resuming work
.
Many places have announced new infrastructure projects, investment will be accelerated, the national power grid, real estate projects are gradually launched, most cable companies are expected to return to normal levels in mid-March, and air conditioning companies are ready for the arrival of summer
.
Since the epidemic has a greater impact on the demand side, after the impact of the epidemic weakens, the whole country will resume production and operation, and the elasticity of demand recovery will be greater
.
The marginal improvement of the supply and demand structure continued to support, which formed a strong support
for copper prices in the second quarter.

In terms of inventory, due to the Spring Festival factor and the mismatch between supply and demand caused by the epidemic, inventories continued to grow sharply, and the cumulative range was higher than the level of previous years, as of March 6, the copper inventory in the previous period was 345,100 tons, an increase of 189,300 tons from before the Spring Festival and an increase of 109,000 tons
from the same period last year.
Since March, the resumption of production has accelerated, the growth rate of inventory has slowed down, and inventory is expected to usher in an inflection point
in April.
In addition, global explicit inventories were at a low level before the Spring Festival, and after a large increase in inventories in February, they are basically unchanged from last year
.

In summary, demand has accelerated to pick up, the consumption season in the second quarter is still expected, domestic inventories are expected to usher in an inflection point in April, and copper prices are expected to recover from a low level, but the recovery space is limited
.
Market sentiment will be converted in the bullish and short sentiment supported by the weak global economy and easing policy, resulting in repeated copper price oscillations, and it is expected that the operating range of Shanghai copper in the second quarter is 43,000-48,000 yuan / ton, and the operating range of London copper is 5400-6,000 US dollars / ton
.
Throughout the year, there will be a slight surplus in copper supply, and copper prices are expected to run
under pressure in the medium term.