May 2019 cable raw materials (copper) monthly report

First, the macro aspect

Domestically,

1.
Data released by the National Bureau of Statistics on May 4 showed that the CPI rose 2.
5% year-on-year in April, an increase of 0.
2 percentage points over the previous month, and ran in the "2 era"
for two consecutive months.
Meanwhile, the core CPI rose 1.
7% year-on-year, down 0.
1 percentage points
from the previous month.

2.
On May 6, the central bank's official website issued an announcement that it decided to implement a lower reserve ratio
for small and Save medium-sized banks that focus on the local area and serve counties from May 15, 2019.
About 1,000 county rural commercial banks can enjoy this preferential policy, releasing about 280 billion yuan of long-term funds, all of which will be used to issue loans to private enterprises and small and micro enterprises
.

3.
On May 22, following "Huawei" and "DJI", China Daily and Global Times quoted US media reports that the US government is considering putting five Chinese surveillance equipment companies on a "blacklist" similar to Huawei, prohibiting them from obtaining US parts and software, including Hikvision and Zhejiang Dahua
.
It is understood that the source in the US report is "people familiar with the relevant situation"
.
In the report, in addition to Hikvision and Zhejiang Dahua Technology Co.
, Ltd.
, the other three companies were not specified
.
The person said the U.
S.
government is considering whether to ban the Chinese companies from accessing U.
S.
parts and software
.
The Sino-US trade divergence was transmitted to downstream companies, triggering market pessimism
.

International aspect,

1.
On May 6, US President Trump announced that from the 10th of this month, the tariffs on Chinese goods worth US$200 billion (about S$272.
8 billion) will be raised from 10% to 25%.

2.
On May 23, federal funds futures showed that the probability of the Fed's policy adjustment this year decreased slightly after
the release of the minutes of the April 30-May 1 meeting of the Federal Open Market Committee.
January federal funds futures show interest rates will be 2.
13% at the end of 2019; The level before the release of the minutes was about 2.
12%; Based on the current effective federal funds rate of 2.
39 percent, current pricing implies a rate cut of more than 25 basis points
this year.
In the Fed minutes, the FOMC mentioned or discussed rate cuts zero
times.

3.
In the United States, the Markit manufacturing PMI hit a new low since 2009 in May, and the PMI of the service industry hit a new low since February 2016; Eurozone manufacturing PMI in May was below the boom-bust line for four consecutive months; Japan's preliminary manufacturing PMI in May fell below the boom and bust line
.
Global manufacturing PMI data will limit the strength
of the copper price rebound.

Second, the market review

This month's macro data is frequent, with the intensification of Sino-US trade negotiations after May Day, and then evolved into a science and technology war, and with the deviation of the ideology of the two sides, or continued into long-term trade frictions, the market mentality changed rapidly, and macro pricing factors affected copper prices to fall
rapidly, continuously and sharply.
In the international environment, the Brexit issue has intensified, and contradictions within the EU have emerged
.
Geopolitics is pervasive, and market risk aversion has poured into the US dollar, bringing some pressure
to copper prices.
The domestic manufacturing PMI data in May was again less than expected, below the dry line, the market was more pessimistic about the downward pressure on the domestic economy, and the overall copper price is now closer to the bearish expectation
.
By the end of the month, copper prices had fallen to a low of 46,180 since June '17
.
It is worth noting that the tight supply of copper concentrate is expected to be confirmed by events such as copper concentrate imports and foreign mine shutdowns in April, but the overall support effect is not obvious
in the short term.

In terms of the market, price fluctuations are more frequent this month, but the premium for the whole month remains at about
100 yuan / ton.
Among them, due to multiple price declines and partial pullbacks, market mentality changes more frequently, and market pessimism increases after continuous declines, and trading is suppressed
.
Then the price rebound was superimposed on favorable expectations, and the overall trading resumed smoothly
.
At this stage, due to many unstable factors and the intertwining of market bull and short forces, traders are cautious in entering the market, but the trading situation is acceptable
.
It is expected that in the later period, as the price continues to fall, the downstream receiving is cautious, and the premium will be partially suppressed
.

This month's import profit window has opened a situation, of which the theoretical import profit in the middle of the month can reach about 200 yuan, the main reason may be external weakness and internal strength, and the domestic support in the middle of the month is greater
.
However, with pessimistic macro expectations, the overall market weakened, and the import window showed signs
of closing again.
It is expected that the pessimism in the subsequent period will continue, and the import window will continue to close
briefly under the influence of weak internal and external markets.

3.
Waste market

Dragged down by the macro environment, copper prices in May showed a weak downward trend, the main force of Shanghai copper mainly runs in the range of 46500-47700 yuan / ton oscillation, the mainstream price of bright copper in the market is 43000-43900 yuan / ton, the price difference of fine waste in Foshan area has also narrowed from more than 1,000 yuan to about 600 yuan at present, market consumption on refined copper has increased, and the demand for scrap copper procurement has been greatly reduced
.

Due to the continuous decline of copper prices, the scrap copper market fell into panic this month, the overall atmosphere was mainly light, most of the holders squeezed the goods received at the previous high price in the hands of the loss was serious and could not move, can only be forced to wait and see the strong mentality of covering the goods, the market supply is in short supply, but some holders have to sell the loss-making source in their hands due to the tight operation of funds; Downstream copper manufacturers due to poor market conditions and fear of the market after the decline, the demand for scrap copper continues to weaken, on-demand procurement, in addition, according to the Fubao copper group investigation learned that some copper plants in Hebei, Tianjin, Guangdong began to overhaul boiler equipment, and temporarily stopped receiving goods
.
The environmental protection storm has risen again, Jiangxi, Guangdong, Henan and other regions are more strict, and some manufacturers and retail investors have no choice but to close their businesses for rectification; In addition, some copper mills in East China have successively moved to Jiangxi, mainly due to local policy subsidies and low costs, and the copper industry chain has gradually become concentrated
.

4.
Trend forecast

The United States is capricious and imposes tariffs again, and copper prices have fallen sharply this month, with London copper falling by more than 9%.

As of the end of the month, the Sino-US trade situation is still tense, there is no new progress news, and the market is worried about the future demand side of copper; At the same time, driven by safe-haven funds, the US dollar index updated a two-year high, accompanied by the weakness of the global manufacturing PMI index, and the macro bearish situation stimulated market pessimism; From a fundamental point of view, the decline in global inventories, the expected tightening of copper concentrate supply, the narrowing of refined waste price spreads and further restrictions on scrap supply will stimulate the consumption of refined copper, which will support copper prices
.
It is expected that copper prices will first decline and then rise in June, with London copper operating range of 5750-6000 US dollars, and Shanghai copper main force 4.
55-47,500.

5.
Industry news

1.
Zambia's copper production in 2019 is expected to fall by as much as 100,000 tons from last year, according to the president of the Zambia Chamber of Mining and Commerce, as miners in Africa's second-largest copper producer are forced to reduce operations proportionately, and costs have risen
due to recent mining tax hikes.
"The mining tax system in 2019 is distorting.
.
.
This has forced miners to do the unthinkable, which is to cut production, because many companies cannot continue to produce
as before.
”

Chile's state-run mining giant Codelco has denied reports that
the company is facing a decline in production due to the conversion of its Chuquicamata mine to underground.
In a separate statement, Mines Minister Baldo Prokunca said Chuquicamata production would decline during the transition period but would be compensated
for by increased ore taste.
Codelco said: "The company is committed to maintaining production at current levels
.

Australian mining company Aurelia Metals Ltd said it had abandoned talks
to acquire Glencore's CSA copper mine in New South Wales.
Smaller peer Aeris Resources Ltd said last month it could not reach an agreement with Glencore to buy CSA copper for
$575 million.

4.
Nevada Copper announced a series of transactions to finance its 100% owned Pumpkin Hollow copper project, which is expected to close in the
final quarter of this year.
Matthew Gili, CEO of Nevada Copper, said in a press release, "We are pleased to be working with our offtake partners and working capital providers to bring this underground project online
later this year.
”

5.
Codelco, Chile's national copper company, the world's largest copper producer, said it had reached a new collective bargaining
agreement with the union that oversees the Salvador small copper mine in northern Chile.
The agreement includes signing bonuses and other benefits totaling $11,600 per employee, plus a salary
increase of approximately 1 percent.
The Salvador Copper Mine produced 60,800 tonnes
of copper in 2018.

6.
Qinghai Copper Company combined with the actual production, scientifically and reasonably formulated the annual maintenance plan, and carried out the first major maintenance work
after putting into operation in an orderly manner from April 19.
The plan focuses on implementation, Qinghai Copper has an annual output of 100,000 tons of cathode copper project system is complex, complex process, a wide variety of equipment, a wide range of design expertise, and various maintenance and maintenance work is difficult
.