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Affected by the new crown pneumonia epidemic, copper prices opened with a drop limit on the first trading day after the Spring Festival
.
Later, the market returned to rationality, and copper prices rebounded
to a certain extent.
However, the momentum of the copper rally weakened in mid-February and did not cover the gap in the first trading day after the holiday
.
Demand suppression cannot be avoided, and some demand may disappear rather than postpone.
Before the Spring Festival, the market generally expected that the growth rate of infrastructure construction and real estate completion area would turn from negative to positive, which would drive copper demand to pick up, but this expectation was obviously disappointed
.
On the supply side, as logistics resume, there is little
chance that copper smelters will cut production.
In addition, enterprises need to meet certain conditions for resuming work, and the downstream terminal consumer industry is more constrained by workers' arrival, and copper prices are difficult to be optimistic
in February.
The current economic impact of the new crown pneumonia epidemic cannot be simply measured by the experience of SARS in 2003 and HINI in 2009, and is actually facing greater downward pressure
.
It is worth noting that the epidemic has changed the pace of China's economic operation, delayed the time for rebound, and the risk of debt default and shutdown of small and medium-sized enterprises has increased
due to the difficulty of maintaining cash flow.
According to the experience of previous years, most industrial enterprises will resume work after the Lantern Festival on the 15th day of the first month, but due to the impact of the epidemic this year, it is estimated that most enterprises will be difficult to resume work or production capacity is incomplete at the end of February, and copper demand can be regarded as almost zero
in February.
From the perspective of the copper industry, the downstream resumption of work is later
than the upstream resumption of work.
According to the survey, at present, except for Zhejiang and Jiangsu, copper processing enterprises have basically resumed work, but most of them are still in the preliminary preparation stage, and the actual production is gradually
recovering.
The resumption time of terminal downstream industries such as power grids and real estate industries with more concentrated labor is still undecided, and processing enterprises are requested to delay delivery
.
From a demand perspective, the demand for copper procurement by SMEs is disappearing rather than being delayed
.
The copper downstream industry includes copper tube, copper strip and copper foil processing enterprises, most of which are small and medium-sized enterprises
.
Affected by the epidemic, the disorderly flow of prevention and control personnel, logistics disruption, and delayed resumption of production have increased the risk of debt default for highly indebted small and medium-sized enterprises, and accounts receivable may climb again
.
The cash flow of MSMEs will not improve due to loose liquidity, reduced debt costs and delayed repayment periods, because many rigid costs such as rent and worker costs still need to be paid as usual, and these costs
cannot be covered by operating income.
As the largest copper consumer, the decline in copper investment in the grid is certain
.
Since January 27, the State Grid e-commerce platform has successively issued notices of the extension of bidding and opening of bids by the head office and various branches, and the demand for this copper has been greatly delayed
.
On February 7, the State Grid bidding resumed, but the corresponding projects are mainly UHV, which has little impact on copper consumption, and downstream deliveries may be delayed to the second half of the year
due to the delay in the tender.
In addition, State Grid set the 2020 grid investment plan at 408 billion yuan, which is down 18% from 2019, and copper demand fell further in
2020 on the basis of 2019.
In 2019, the actual investment amount completed by State Grid decreased by about 12.
7% compared with the total planned amount, which is also the first time that State Grid's power grid investment amount has fallen below 450 billion yuan
in the past five years.
According to data released by the China Electricity Union, China's power grid investment fell by 9.
6% year-on-year in 2019 and increased by 0.
6%
in 2018.
In summary, from a macro level, the panic caused by the epidemic has returned to rationality, and copper prices have rebounded to a certain extent, but this does not mean that the economy has rebounded, and the potential impact of the epidemic on the economy has not yet appeared
.
The most noteworthy thing is that some small and medium-sized enterprises are difficult to support cash flow, projects are canceled, some procurement demand is disappearing rather than postponed, and the possibility of production reduction further declines
with the recovery of logistics.
Demand determines the direction, supply determines the rhythm, and the center of gravity of copper prices is expected to move from 48,000-49,000 yuan / ton before the holiday to 45,000-46,000 yuan / ton
.
