December 2019 cable raw materials (copper) monthly report

First, the macro aspect

Domestically,

1.
According to data from the National Bureau of Statistics, in November, the manufacturing PMI was 50.
2%, up 0.
9 percentage points from the previous month, and returned to the expansion range again after falling below the critical point for six consecutive months
.
Both ends of supply and demand have improved, imports and exports have improved, and the prosperity of large, medium-sized and small enterprises has generally rebounded
.
Affected by external uncertainties and other factors, the downward pressure on the manufacturing industry still exists
.

2.
Caixin China's manufacturing purchasing managers' index (PMI) recorded 51.
8 in November, up 0.
1 percentage points from October, rebounding for five consecutive months and the highest since
2017.
This trend is in line
with the National Bureau of Statistics Manufacturing PMI.
China's economy continued to repair in November, and manufacturing investment may be in the "grinding bottom" stage, and low inventories have been extended for a long time
.

3.
The Ministry of Commerce said that since the beginning of this year, China's import demand has remained stable
.
Imports in November were 1.
29 trillion yuan, a year-on-year increase of 2.
5%.

The increase in imports in November was mainly the result of
domestic demand.
The domestic market has strong demand for imported consumer goods, manufacturing PMI has returned to the expansion range, import demand for raw materials and other commodities has rebounded, and the import volume of some bulk commodities has increased, and policy effects have gradually emerged
.

International aspect,

1.
In the early morning of December 12, Beijing time, the Federal Reserve announced the results of the last interest rate meeting of the year, as expected by the market, the Fed kept the target range of the federal funds rate unchanged at 1.
5% to 1.
75%, suspending the rhythm
of "March three interest rate cuts" since July this year.
The interest rate dot plot shows that a majority of the Federal Open Market Committee (FOMC) expects interest rates to remain at current levels until the end of 2020, with rates likely to rise
again in 2020.

2.
The US non-farm payrolls data for November far exceeded expectations, with nonfarm payrolls surging by 266,000, far exceeding the expectations of economists polled by Dow Jones by 187,000, while the unemployment rate fell from 3.
6% to 3.
5%, the
lowest unemployment rate since 1969.
The data shows that the U.
S.
economy is still expanding modestly, but a strong job market doesn't mean the U.
S.
economy is restless
.

3.
The preliminary Eurozone manufacturing PMI for December was 45.
9, also lower than the expected 47.
3 and 46.
9
previously.
The Eurozone, Germany and France all missed expectations for December manufacturing PMIs, raising concerns among more market participants that the Eurozone economic outlook for 2020 may be bleak, and the UK manufacturing and services PMI indices released on the same day were lower than expected
.

Second, the market review

Copper prices fluctuated greatly this month, with Shanghai copper running at 4.
7-49,900
.
At the beginning of the month, affected by the British election and the Sino-US trade agreement, the confidence of the copper market increased rapidly, and the price rose rapidly, and the increase in the week exceeded 1,000 yuan
.
On the other hand, China's manufacturing PMI returned above the boom and bust line in December, and the better-than-expected recovery of the Eurozone manufacturing industry in December further boosted market confidence and brought some support
to copper prices.
However, with the end of the year gradually coming, affected by the weakening of the power of merchants and copper bulls, the spot market trading is light, the impact of Shanghai copper on the high level has not been successful, further affecting the weakening of market confidence, later with the conflict between the United States and Iran, geopolitics has put greater pressure on copper prices, Shanghai copper gradually fell back after the high shock adjustment, the price center of gravity moved down to touch the support level
.

In terms of the market, this month's Shanghai copper premium showed a situation of first rising and then suppressing, with an average monthly premium of about
20 yuan.
At the beginning of the month, affected by the rapid rise of Shanghai copper, downstream manufacturers actively purchased, the electrolytic copper market was once hot to boost the good copper premium, but this round of high premium situation only maintained until the middle of the month, with the end of the year near the recovery of goods and the impact of the copper rise and so on, traders are willing to ship to realize, in the month after the copper for the month after the rapid decline of the overall premium into discount, but it is worth noting that after the New Year's Day market trading gradually picked up, good copper into premium, the later premium again sharp decline space is limited
.

In terms of import profit and loss, the profit window of electrolytic copper imports this month remained closed, and the overall import profit remained at about -400 yuan / ton, the main reason may be that London copper was strongly recovered by the Eurozone manufacturing data, but the domestic Shanghai copper confidence is weak, the external strength and internal weakness pattern closed the import window, but there is still an inflow in the source of imported goods, and the market imports copper maintain a certain degree of circulation
.

3.
Waste market

Copper prices generally showed a trend of low and higher in December
.
The main operating range of Shanghai copper is around 49000-49500 yuan / ton, and the mainstream price of bright copper in the market is 44000-44300 yuan / ton
.
At present, the price difference of refined waste has narrowed slightly to around 2200 yuan, which is still in the expansion range, and the consumption demand for scrap copper is still high
.

Copper prices ended their low run, once touching an eight-month high, bringing confidence to the scrap copper market and a warming trading atmosphere
.
The rebound of copper prices has led to an increase in downstream cable demand orders, and copper rod consumption has risen, so the production of scrap copper rod factories has gradually increased, and the market has actively entered the market to purchase raw materials, and the price of scrap copper has strong
support.
In terms of supply supply, it is still in a state of shortage, although the willingness of holders to cover goods has loosened compared with previous months, due to the restrictions on copper scrap imports and the bullish future market of cargo merchants, the number of people who are reluctant to sell has generally increased; And there are also regional differences, such as according to Fubao's understanding that Shandong manufacturers are emptying the warehouse near the end of the year, and the source of scrap copper in the Linyi Metal City market has increased
.
In Jiangsu and Zhejiang regions, some freight yards have reported a shortage
of goods.

Near the end of the year, manufacturers focus on payment collection and pre-holiday stocking
.
It is understood that scrap copper manufacturers generally start to reserve raw material inventory about 10-20 days in advance, and it is expected that this year's stocking may not be as strong as last year
.

4.
Trend forecast

This month, Shanghai copper first rose and then declined, once hitting the 50,000 mark, and then market confidence weakened, and the price center of gravity shifted
downward.
Internationally, the first round of Sino-US trade negotiations has basically landed, the global manufacturing industry has warmed up, the Eurozone manufacturing PMI data has improved more than expected, and the global economy has shown a trend of stabilization
.
However, this month, international geopolitics has a bearish impact on copper, and tensions have put pressure on non-ferrous metals
.
Domestically, the stabilization of the domestic economy and counter-cyclical policies are favorable to support the copper market
.
It is worth noting that this month, Shanghai copper rose rapidly under multiple stimuli to hit the 50,000 mark without success, domestic Shanghai copper confidence has declined, the last week of December converged some of the previous gains, copper prices overall center of gravity maintained around
49,000.
In the short term, market confidence is weak, positive news has a limited impetus, or weak performance, while medium-term economic stabilization has brought some support
to copper prices.

5.
Industry news

1.
Ogubis, Europe's largest copper smelter, said that copper production was interrupted in November at the Oren plant in Belgium, but deliveries to customers are still proceeding
normally.
The smelter produces around 340,000 tonnes of copper per year, including bars and specialty wires, mainly for the Western European market
.
Operations are expected to resume by the end of the year, with the affected parts returning to operations
by the second quarter of 2020 at the latest.

2.
Rio Tinto plans to spend $1.
5 billion to expand the Kennecott copper mine project
in Utah.
There is a growing trend for mining companies to invest in strategic mineral projects in the United States, and Rio Tinto's investment in this expansion project is more than
double the amount that mining companies have recently invested in copper projects in the United States.
Automakers are demanding copper in the production of electric vehicles and other components
.

3.
Jiangxi Copper announced that its wholly-owned subsidiary JCCI intends to transfer 100% of the equity of PCH held by PIM, an indirect participation company of the company, at a transaction price of US$1,115.
9 million
.
PCH currently holds an 18% stake
in FQM, a company listed on the Toronto Stock Exchange in Canada.
FQM has 9 copper mine development projects
in 8 countries including Zambia and Panama.
The FQM controls abundant copper reserves and is expected to generate strong cash flow
in the future.

4.
A few days ago, Jiangxi Copper and Zambian crude copper producer Qianbixi under CNMC signed a benchmark of 128 US dollars / ton
for CIF imported crude copper in 2020.
This RC is well below the level of $165/mt for long orders executed this year, and is also close to SMM's estimated RC break-even point of $130/mt for smelters, reflecting expectations of tight crude copper supply in the market
.

5.
The Solid Waste and Chemical Management Technology Center of the Ministry of Ecology and Environment of China recently issued the first batch of metal scrap import quotas in 2020, of which 270,000 tons of high-grade copper scrap and 275,000 tons of aluminum scrap were approved, a total of less than 550,000 tons
.
China plans to reduce scrap metal imports classified as solid waste to zero
by the end of 2020.

6.
The China Joint Negotiating Group on Copper Feedstocks (CSPT) raised the minimum price of copper processing refining fees (TC/RCs) in the first quarter of 2020 by 1.
5% to $67 per tonne or 6.
7 cents per pound, slightly higher than $66 per ton and 6.
6 cents per pound in the fourth quarter, but down 27.
2% year-on-year, as China's refinery capacity has increased significantly and mine supply growth this year has been limited
.