February 2022 cable raw materials (copper) monthly report

First, the macro aspect

International aspect,

1.
The US PPI monthly rate recorded 1% in January, significantly higher than the expected 0.
5%, the largest month-on-month increase in eight months; Core PPI came in at 0.
8%, higher than expectations of 0.
5%.

The analysis said that as inflation continues and spreads, companies will face increasing pressure
to raise prices.

2.
Eurozone GDP in the fourth quarter of last year recorded a revised quarterly rate of 4.
6%, in line with the preliminary reading, reaffirming the slight economic growth
of the euro area in the fourth quarter.
The analysis said that in the case of the epidemic affected by the Omicron strain, this can be said to be a better than expected performance
.

3.
On February 21, local time, Russian President Putin delivered a national video speech, announcing the recognition of the self-proclaimed Donetsk People's Republic and Luhansk People's Republic of Wudong civil armed forces as independent countries, and signed relevant agreements and presidential decrees
.

Domestically,

1.
According to central bank data, at the end of January, the balance of broad money (M2) was 243.
1 trillion yuan, an increase of 9.
8% year-on-year, and the growth rate was 0.
8 and 0.
4 percentage points
higher than the end of last month and the same period last year, respectively.
The balance of narrow money (M1) was 61.
39 trillion yuan, down 1.
9% year-on-year, excluding the impact of the Spring Festival timing factor, M1 increased by about 2%
year-on-year.
The balance of currency in circulation (M0) was 10.
62 trillion yuan, a year-on-year increase of 18.
5%.

Net cash investment in the month was 1.
54 trillion yuan
.

2.
The National Bureau of Statistics released the national CPI (Consumer Price Index) and PPI (Industrial Producer Price Index) data
for January 2022.
In January, household consumption was relatively stable and the market was well supplied, with CPI rising 0.
4% month-on-month and 0.
9% year-on-year; The decline in steel and coal prices in January led to the overall decline in industrial prices, with PPI falling by 0.
2% month-on-month, a decline of 1.
0 percentage points from the previous month, and a year-on-year increase of 9.
1%, an increase of 1.
2 percentage points
from the previous month.

3.
The Caixin China General Service Sector Business Activity Index (Services PMI) recorded 51.
4 in January 2022, down 1.
7 percentage points from the previous month, indicating a slight expansion in service sector activity, but the growth rate slowed to the lowest
in nearly five months.
The Caixin China Manufacturing Purchasing Managers' Index (PMI) recorded 49.
1 in January 2022, down 1.
8 percentage points from the previous month and the lowest since March 2020, while the Caixin China Services PMI fell 1.
7 percentage points to 51.
4
.
Both major industry PMIs retreated, dragging the Caixin China composite PMI to 50.
1 in January, down 2.
9 percentage points from the previous month, indicating a weak economic expansion
.

Second, the market review

Since February 2022, copper prices have risen first and then fell, and prices have risen rapidly after rising during the month, but on the whole, the price center of gravity is still hovering
at a high level.
Represented by Yangtze River spot 1# copper, the average price of copper # at the beginning of the month was 71210 yuan / ton, and the highest point rose to the highest point of about 72600 yuan / ton within the month (February 11), and then the price fell rapidly and sharply, converged most of the previous gains, and basically in the second half of the month was basically in a narrow range of shock sorting, with limited
ups and downs.
As of the end of February, the average price of spot 1# copper in the Yangtze River was 70,940 yuan / ton, a slight increase of 340 yuan / ton from 70,600 yuan / ton at the end of January, an increase of about 0.
48%.

On the macro front, data from the Bureau of Statistics shows that in the fourth quarter of 2021, domestic GDP increased by 4% year-on-year, estimated at 3.
3%, in addition, the domestic manufacturing PMI continued to rebound in the fourth quarter, and the recovery of the manufacturing industry led to an improvement in market sentiment
.
In January 2022, affected by domestic and foreign holiday factors, the domestic official manufacturing PMI fell slightly to 50.
1, and the Caixin manufacturing PMI fell to 49.
1, falling back below the critical point of 50
.
However, considering that the domestic economy is expected to remain unchanged, the domestic manufacturing industry may operate stably in the first quarter, the macro level is basically stable, and the market returns to the industrial side, and correspondingly, non-ferrous metal prices may remain stable
.
In the short term
, copper prices are likely to continue the current range volatility.

Abroad, the epidemic has become normalized, the European and American economies have recovered slowly, and huge inflationary pressures still exist
.
It is reported that the European Central Bank has stated that it will not consider raising interest rates for the time being, in addition, the probability of the Fed raising interest rates in March has dropped to about 50%, which has a reduced impact on market sentiment, and the market is not expected to make a directional choice
too early.
Domestically, the national policy supports the stable operation of the economy
.

In terms of the market, after the holiday, the country is still in the demand off-season, downstream terminal demand recovery is slow, the overall market transaction is light, excluding seasonal factors, the demand side is still relatively optimistic, with the end of the Winter Olympics and the gradual resumption of work in the downstream of various places, it is expected that consumption will steadily increase
.
On the one hand, the expectation of stable domestic growth remains unchanged, policy measures are expected to be intensively introduced, the central bank has cut interest rates, releasing a positive signal of wide monetary and credit easing, the National Development and Reform Commission has clearly decided to urgently introduce and implement strategic policy measures to expand domestic demand, and infrastructure investment is ahead, all of which are conducive to boosting metal demand
.
In addition, in the short term, the impact of Omicron on the economy will weaken, overseas economies will usher in a recovery, coupled with domestic policy efforts, the global economy is expected to resonate, demand is expected to grow, and copper prices have some support
.

3.
Waste market

Copper scrap trading remained hot during the month, and traders who had been waiting and watching were actively shipping before March 1, and the trading atmosphere was strong
.
Among them, the supply of Linyi Metal City has increased, most of which are sent to Hubei, Henan, Jiangxi and other places, and some are also sent to copper factories or traders for storage
.

On March 1, the new policy of regeneration tax No.
40 was implemented, and now most copper factories have established trading companies, and according to the development of the future market, the early stage is still mainly based on transactions without
tickets.
Copper scrap still has some room
to depreciate after the backlog of withholding and paying taxes.

Local markets have decided to stop collecting in advance or wait for specific operational requirements to land; Specifically, the centralized markets in Linyi Metal City, Foshan Dali and other places are basically in the wait-and-see stage, and there is no news of centralized tax payment or self-operation responsibility; In terms of copper mills, most copper mills in Shangrao, Jiangxi Province, announced that after the 25th, orders for scrap copper and copper rods require early negotiation and completion; A large copper factory in Fuzhou began to quote at 13% VAT on the 17th, and the subsequent price reduction without a ticket was obvious; More than half of the copper factories in Hubei have stopped quotation receipt, and there are many prompts to upstream suppliers to follow the price before the 25th; In Henan area, Gongyi copper factory news on the 18th required that all orders must be delivered before the 23rd, and it is in full production in the near future, and there is a plan to stop production
at the end of the month.

4.
Inventory

In the spring domestic off-season, domestic and foreign copper stocks showed obvious differentiation, domestic copper stocks and bonded zone stocks increased, while London copper stocks maintained a downward trend
.
Data show that on February 14, China's electrolytic copper social inventory was 198,200 tons, an increase of 99,500 tons from before the Spring Festival; on February 24, the spot inventory of electrolytic copper in the domestic market was 211,800 tons, an increase of 11,100 tons from February 17 and an increase of 04,200 tons
from February 21.

Abroad, the epidemic has disrupted the global supply chain, the inventory of some commodities is at a historical low, after the inventory "red light" of some non-ferrous metals, the market has heated up concerns about the shortage of copper stocks, and downstream manufacturers have accelerated replenishment in anticipation of longer lead times, causing overseas copper stocks to shrink
further.
As of Feb.
15, London copper stocks had broken last year's historic low, falling to 70,000 tonnes
.
As of 24 February, LME copper stocks stood at 74,750 tonnes, warehouse receipts were written off 16,825 tonnes and COMEX copper stocks were 72,410 tonnes
.
In the short term, low inventories are a positive factor for copper prices, and as the problem of global shipping tightness and inventory retention is resolved, the low water level of inventories will be changed, and the support for copper prices will be weakened
.

5.
Industry news

1.
According to foreign media news, data from the International Copper Research Group (ICSG) shows that copper stocks in China's bonded warehouses at the end of November 2021 decreased by 178,000 tons compared with the end of 2020
.

2.
The latest government data showed that production from Chile's main copper mines fell in January, mainly due to the weak performance of state-owned mining giant Codelco
.
Chile's National Copper Council said copper production from Codelco, the world's largest red metal producer, fell 15 percent year-on-year this month to 120,800 tonnes
.

3.
Analysts say the conflict in Ukraine could disrupt the world economic outlook in an unpredictable way and exacerbate inflationary pressures
.
Mining companies are cash-rich after a bumper harvest, and they have crossed a delicate balancing act, as they benefit from soaring commodity prices during the Ukraine and Russia crises, but may also face high inflation, which could hit short-term demand and slow growth plans
.

4.
Zijin Mining announced the Kamoa-Kakula copper mine energy enhancement plan, on the basis of the commissioning of the second phase of the project in April 2022, it is planned to increase the design capacity of the first and second phase of the plant from a total of 7.
6 million tons/year of the original treated ore to 9.
2 million tons/year, with an annual output of more than 450,000 tons of copper
, becoming the world's fourth largest copper mine.

In a new report, Bank of America (BofA) global research analysts said they expect the copper market to turn into deficits
starting in 2025 after completing the current wave of project construction.

6.
Satellite monitoring data from copper mills showed that global copper smelting activity fell in February, in part due to the Lunar New Year holiday
in China's largest producer.
However, after a sharp decline, activity in China rebounded
at the end of March, according to a statement from commodities brokers Marex and SAVANT (the company's satellite analytics service launched with Earth-i in 2019).