January 2020 cable raw materials (copper) monthly report

First, the macro aspect

Domestically,

1.
The National Bureau of Statistics announced the operation of
China's purchasing managers' index in December 2019 on its official website on the 31st.
Data showed that in December, China's manufacturing purchasing managers' index (PMI) was 50.
2%, unchanged
from the previous month.
The non-manufacturing business activity index was 53.
5%, down 0.
9 percentage points from the previous month, indicating that the non-manufacturing industry generally maintained an expansion trend and the growth rate slowed down
.

2.
The People's Bank of China: In order to support the development of the real economy and reduce the actual cost of social financing, the People's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.
5 percentage points (excluding financial companies, financial leasing companies and auto finance companies)
on January 6, 2020.
Among them, the central bank said that the RRR reduction is a comprehensive RRR reduction, reflecting counter-cyclical adjustment, releasing long-term funds of about 800 billion yuan, effectively increasing the stable source of funds for financial institutions to support the real economy, reducing the cost of funds for financial institutions to support the real economy, and directly supporting the real economy
.

3.
The National Bureau of Statistics released data on the 27th that in November, the total profit of industrial enterprises above designated size in the country increased by 5.
4% year-on-year, and the growth rate turned from negative to positive (down 9.
9%
in October).
Cumulative profit from January to November fell by 2.
1% year-on-year, a decline of 0.
8 percentage points
from January to October.

International aspect,

1.
On December 24, China and the United States agreed on the terms of the "phase one" trade deal, the United States will reduce some tariffs, and China has eliminated retaliatory tariffs
scheduled to take effect on December 15.
Before the Dec.
15 deal, U.
S.
corn, sorghum, wheat, denatured ethanol and refined copper cathodes had faced additional 10 percent Chinese import tariffs
.
Propane, cotton, aluminum scrap, copper scrap and rare earth magnets are scheduled to be subject to an additional 5% tariff
.
China canceled plans
to impose a 5 percent tariff on U.
S.
scrap aluminum starting Dec.
15.
China began imposing 25% tariffs on some U.
S.
goods in April 2018, with scrap among those affected, and in August 2018 the tariffs were raised by another 25%.

2.
Germany's unseasonally adjusted GDP in 2019 was 0.
6% year-on-year, 0.
6% expected, and 1.
5%
in the previous month.
Germany, Europe's largest economy, grew in 2019 in its slowest year since 2013, with growth slowing markedly from the previous year, and export-dependent manufacturers are facing ongoing adverse effects
from trade disputes and weak overseas demand.

3.
The final value of the Eurozone manufacturing PMI in December was 46.
3, the expectation was 45.
9, and the preliminary value was 45.
9, which was below the boom-bust line
for the 11th consecutive month.
CHIEF ECONOMIST AT IHS MARKIT, A MARKET RESEARCH FIRM, SAID: EURO ZONE MANUFACTURERS REPORT SHOWS THAT PRODUCTION FELL AT THE FASTEST
PACE SINCE 2012 IN 2019.
The survey showed that production fell by 1.
5% in the fourth quarter, causing a serious drag
on the overall economy.

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 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 it is understood that Shandong manufacturers are near the end of the year to empty the factory inventory, Linyi Metal City market scrap copper supply increased
.
In Jiangsu and Zhejiang regions, some freight yards have reported a shortage
of goods.

At the end of the year, manufacturers focused 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 the stocking strength may not be as good as last year
.

In terms of environmental protection, it is understood that the recent joint inspection of environmental protection in Changge Dazhou Town has affected the operation of some copper enterprises, and the environmental protection requirements in the north have become more and more stringent.

As well as Hengshui City's red warning emergency notice for heavily polluted weather, many manufacturers have been shut down one after another due to the recent environmental impact of Henan, Hebei and other places
.

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, Trump said that it will be signed in mid-January, the global manufacturing industry has warmed, the Eurozone manufacturing PMI data has improved more than expected, and the global economy has stabilized
.
But this month, international geopolitics had a bearish impact on copper, the United States bombarded Iranian military officers and caused market turmoil, and the Turkish parliament agreed to send troops to Libya, and tensions pressed non-ferrous metals
.
Domestically, the central bank released the news of the RRR cut this month, and cut the reserve by 0.
5 percentage points from January 6, the counter-cyclical policy is good for the market, China's official December manufacturing PMI data stabilized year-on-year, and the revenue and expenditure were 50.
2 above the boom and bust line, and the domestic economy stabilized and counter-cyclical policies were 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.
It is expected that next month, Shanghai copper will first decline and then rise, the main range of Shanghai copper is 4.
84-50,000, and London copper is 6050-6250 US dollars
.

5.
Industry news

1.
Chile's mining activity fell 7.
1 percent in November, partly due to problems operating major mines in South American countries during a tumultuous month of protests, road and port blockades and worker strikes
, according to data released by the Chilean government.
The world's largest copper producer reported that copper production fell 6.
7% to 504366 tonnes
in November from a year earlier.
Government statistics agency INE noted that the decline in mining activity was partly due to an unfavorable comparative basis, which reflected strong production
in the previous November.

2.
Zijin Mining completed the acquisition of Timok copper-gold mine
.
The edge and depth of the ore body in the lower belt of the Timok copper-gold mine are not closed, which has good potential
for reserve increase.
After the completion of this acquisition, the company will increase its copper resources by 7.
72 million tons and associated gold by 161 tons, which will be conducive to the overall development of
TIMOK upper and lower belt mines.

3.
First Quantum plans to spend $1 billion to expand the production of Africa's largest copper mine
.
The investment will extend the life of the Kansanshi copper mine and stem the decline in production
.
According to people familiar with the matter, the expansion plan must be approved by the company's board of directors, but things will be complicated
by the tax and asset dispute between the miners and the Zambian government.

4.
The exploration branch of Rio Tinto, a diversified mineralist, has acquired a 51% stake
in the Citadel copper-gold mine in Australia.
The Citadel copper-gold project is located in Western Australia and the company has previously invested US$
11 million in the copper-gold exploration project.

5.
Ecuador exported 22,000 tons of copper concentrate for the first time from the Chinese-funded Mirador mining project, worth about US$25 million, to the port of Guayaquil and then by sea to Tongling, China
, according to the Ministry of Energy.
Mirador is operated by Ecuacorriente, a subsidiary of China Railway Construction Tongguan Investment Co.
, Ltd.
, and owns the 30-year mining rights
to the mine.
The mine started production in July 2019 and is expected to produce approximately 94,000 tonnes
of copper concentrate per year.

6.
Canadian copper producer First Quantum's copper production in 2019 rose by 96,000 tons from the previous year to 702,000 tons, a record high
.
In addition, the company said production is expected to increase by up to 25%
this year.
Copper production in 2021 and 2022 is expected to be between
800,000 and 850,000 tonnes.