June 2022 cable raw materials (copper) monthly report

First, the macro aspect

International aspect,

1.
The core PCE price index in the United States rose 4.
7% year-on-year in May, the lowest since November last year, and was expected to rise by 4.
8% and the previous value rose 4.
9%.

The US core PCE price index rose 0.
3% m/m in May, up 0.
4% expected and up 0.
3%
in the previous month.

2.
Revised data released by the U.
S.
Department of Commerce showed that U.
S.
gross domestic product contracted at an annualized rate of 1.
6 percent in the first quarter of this year, a downward revision of 0.
1 percentage points from the previous estimate of a contraction of 1.
5 percent
.
A preliminary report released by the Commerce Department in April showed that U.
S.
GDP contracted by 1.
4 percent on an annualized basis in the three months from January to March, a huge blow
to economists' forecast of 1.
1 percent.
However, economists expect some slowdown
in economic growth as the Fed continues to raise interest rates to cool inflation.

3.
The World Bank released the Global Economic Prospects report, which lowered its global economic growth forecast for 2022 to 2.
9%, down 1.
2 percentage points from its 4.
1% forecast in January, and warned of the risk of
stagflation.
In 2023, global inflation is expected to moderate, but it is still likely to be above the target level
in most countries.
Growth in advanced economies is expected to fall sharply to 2.
6 percent in 2022 from 5.
1 percent in 2021, down 1.
2 percentage points
from the January forecast.
The U.
S.
and eurozone are both expected to grow by 2.
5 percent this year, revised down 1.
2 and 1.
7 percentage points
from the January forecast, respectively.
The report also predicts that growth in emerging market and developing economies will almost halve to 3.
4%
from 6.
6% in 2021.

Domestically,

January and June, Caixin China's manufacturing purchasing managers' index (PMI) recorded 51.
7, up from 3.
6 percentage points in May, ending the contraction trend of the previous three months, returning to expansion territory, and the highest
since June 2021.

2.
China's manufacturing purchasing managers' index for June was 50.
2, 50.
5 expected; the previous value was 49.
6
.
The non-manufacturing PMI for June was 54.
7 vs 50.
5 expected vs.
47.
8
previously.
June composite PMI 54.
1 vs 48.
4
prior.

3.
The National Development and Reform Commission held a video and telephone conference
to solidly promote the preliminary work of the project and accelerate the construction of major projects.
The meeting required that development and reform departments at all levels should highlight the focus of work, forcefully, orderly and effectively promote the construction of major projects, and actively expand effective investment
.
The first is to further refine the list of projects, categorize policies, and accelerate the implementation of the 102 major projects
of the 14th Five-Year Plan.
The second is to grasp the construction tasks in key areas, comprehensively strengthen infrastructure construction, expand investment in manufacturing and high-tech industries, and strengthen the construction
of social and people's livelihood to make up for shortcomings.
The third is to give full play to the traction role of major projects and government investment, strengthen social capital investment and financing support, and promote the healthy development of
social capital investment.
At the same time, it is necessary to coordinate epidemic prevention and control and project construction to minimize the impact of
the epidemic on the construction of major projects.

Second, the market review

In June, copper prices fell sharply, and the main domestic Shanghai copper broke downward, continuously falling below the annual line and a number of integer
thresholds.
The intra-month trading logic changed from stagflation to liquidity crunch, coexisting with recession expectations
.

Macro pessimism catharsis
.
U.
S.
CPI data surged to a 40-year high in May, forcing the Fed to raise interest rates by 75 basis points, the biggest hike since 1994, and Powell vowed to control inflation
at the expense of the economy.
Many national and regional central banks have followed the Fed's footsteps to start a wave
of interest rate hikes.
At the same time, the World Bank has once again lowered its global economic growth forecast, sharply increasing the risk of recession, and limiting the upper limit
of risky asset prices.
China's June PMI data returned to the expansion range, and the package of policy measures to stabilize the economy has achieved initial results, but it is still less than expected, and the boost effect is quite limited
.

In terms of fundamentals, the spot TC guidance price of copper concentrate in the third quarter was unchanged
from the guidance price in the second quarter.
In the second half of the year, concentrate supply is abundant, refinery profits are high, and refined copper capacity is expected to turn
to overcapacity.
While global explicit inventories remain low, their support margin weakens
.
It is recommended to pay attention to the bottom of the Lun copper double white line, continue to fall and probe the bottom before the bottom is built, and there may be a short-term rapid rise
after the bottom is built.

In the market, spot copper fell by 8,490 yuan in June, and the premium continued to decline
.
Under the background of Shanghai's full resumption of work, the transaction atmosphere in East China has warmed up, downstream buying is just demanded, affected by the continuous decline in the market, the overall willingness to replenish stocks is not strong, the inflow of imported copper resources has increased, it is difficult to have room for price up, and the demand is relatively light
.
In terms of import profit and loss, the Fed hawkish interest rate hike, the dollar index continued to rise, the yuan volatility narrowed, this month's import profit window opened, the end of the month within 200 yuan / ton
.

Overall, due to high inflation data, the Fed raised interest rates by 75 basis points this month, and maintains hawkish rate hike expectations for July and August; At the same time, the decline in economic data in Europe and the United States has verified the expectation of recession, and under the pressure of the demand side outlook, copper prices have fallen sharply, and the current downward channel has not yet bottomed out, and the overall price operation center will be further moved
down.

3.
Waste market

In June, spot copper fell by about 9200 yuan / ton compared with the previous month, and scrap copper fell by about
8100 yuan / ton.
The difference in refined waste was around 1,030 yuan, down 320 yuan
from May.

In early June, Shanghai began to resume work and production in an orderly manner, and the external market rose sharply during the Dragon Boat Festival, and traders sold goods at a high price, but due to the narrowing of the refined waste price difference, the superimposed copper rod orders were weak, and the copper mill's willingness to raise prices was not strong, cautious procurement, and the overall market transaction was average
.
Affected by the Fed's interest rate hike on June 16, the market has fallen continuously since the 13th, and the highest decline difference is about
10,000.
Causing market panic and bearish sentiment is prominent, the number of short orders has increased, market quotations are chaotic, traders are receiving goods at a high price, and quotations exceed some copper mills
.
Copper prices fell, some holders suffered serious losses, and the market stagnated, and the trading atmosphere was once as low as freezing
.

At the end of the month, the Shanghai copper market was weak, copper prices continued to decline, market risk aversion heated up, and traders changed from the previous cover to sell in time to have timely and timely stop losses
.
On the other hand, in terms of copper plants, the price difference of refined waste during the period was inverted, refined copper replaced scrap copper, scrap copper price was obvious, and the profit margin of copper rods declined, and production was mainly
able to do less.

4.
Inventory

LME inventories fell significantly in June, while domestic stocks remained low, but from the perspective of inventory trends, the dematerialization slowed down significantly after mid-June, indicating that demand was less than expected
.

On the LME side, copper stocks recently fell to a low of 113,000 tonnes, with LME copper stocks falling from 180,000 tonnes on May 18, with most of the copper going to China
.
As of July 1, the national inventory (including bonded areas) was 420,200 tons, an increase of 14,300 tons month-on-month, of which the bonded zone decreased by 09,600 tons and the non-bonded area increased by 23,900 tons
.

5.
Industry news

1.
Tongling Nonferrous Metal said on the interactive platform that the average price of the company's sulfuric acid products in May 2022 was about 850 yuan / ton, and the current price is about
940 yuan / ton.
The company's smelting and processing fees are divided into two modes
: long order and spot.
The processing fee for long orders is 65/6.
5; the recent average of spot processing fee (TCRC) remains around 80/8.
0, which translates to about 3408 yuan/ton
at the USD/RMB exchange rate of 6.
71.
The price is affected by many factors such as supply and demand, there is uncertainty, and I am optimistic about sulfuric acid products and smelting and processing fees in the second half of the year
.

2, foreign power news on June 15, focusing on Chile's large copper producer - Antofagasta warned that the company's copper production in 2022 will be at the low end
of the forecast range of 660,000 to 690,000 tons.
This month, the company's Los Pelambres business was affected
by a concentrate pipeline leak.
Antofagasta said repairs have begun and the pipeline should be restored
by the end of June.
During the shutdown, the processing plant has been operating at a low operating rate and the concentrate is stored in the
plant.
These concentrates will be transferred to port
between July and October using backup pipelines.

3.
Recently, Jiangxi, Guangdong, Guangxi and other places still have a wide range of heavy rain weather, a series of days of heavy precipitation in northern Guangdong, northern Guibei and Gannan and other areas, precipitation time is extremely long, precipitation accumulation is large
.
Affected by this, as an important downstream part of the copper rod market, the start of cable enterprises in many places in South China has been hindered
.
On the whole, the impact of heavy rainfall in South China on the overall copper consumption in the region is mainly concentrated in northern Guangdong, northern Guibei and other places, and the Pearl River Delta region, which accounts for a large proportion of consumption, has a small impact.
However, due to the slow recovery of demand for cable companies in South China, coupled with the continuous decline in copper prices, market funds are more tight affected by the middle of the year, and it is expected that the trading level of copper rods in South China will remain weak before July
.

4.
It is understood that due to the epidemic, the second quarter general manager meeting of the CSPT group originally scheduled to be held in Huangshi was held online, and the spot copper concentrate procurement guidance processing fee for the third quarter was 80 US dollars / ton and 8.
0 cents / pound, which was the same as the spot copper concentrate procurement guidance processing fee
in the second quarter.
In addition, the average price of SMM imported copper concentrate index in the second quarter was 78.
68 US dollars / ton
.

5.
Chile's copper exports, the world's largest copper producer, reached US$3.
76 billion in May, down 18.
3%
year-on-year, according to the Chilean central bank.
Despite the decline in copper exports, Chile achieved a trade surplus of $851 million in May, with exports up 19.
2 percent to $9.
29 billion and imports up 25.
7 percent to $8.
44 billion
.

In an interview with Reuters in Santiago, Maximo Pacheco, chairman of the board of directors of Codelco, the world's largest copper producer, said that the company will adjust its strategy to produce more sustainable copper and meet the growing environmental needs
of Andean countries.
The company hopes to reduce emissions by two-thirds, particulate matter emissions by 25%, and recycle more than half of its industrial waste
by 2026.
The company recently closed its Ventanas smelter in a saturated industrial zone on the central coast, which has had multiple pollution-related health incidents
.
In addition to regulations, Chile faces an ongoing water crisis due to a historic prolonged drought that has lasted more than a decade and affected copper production
.