May 2020 cable raw materials (copper) monthly report

First, the macro aspect

Domestically,

January and April, Caixin China's general service industry business activity index (services PMI) recorded 44.
4, up 1.
4 percentage points from March, but still in contraction territory, indicating that service industry output continued to decline and the downward pace slowed
.

2.
According to data from the General Administration of Customs, the total value of China's foreign trade imports and exports in April was 2.
5 trillion yuan, a slight decrease of 0.
7% year-on-year, and the decline was further narrowed
.
Exports in the month were 1.
41 trillion yuan, an increase of 8.
2%, releasing a positive signal of stabilizing foreign trade, after a double-digit decline
in the first quarter of this year.

3.
China's April CPI was 3.
3% year-on-year, 3.
7% expected, and 4.
3%
in the previous month.
China's April PPI was -3.
1% y/y vs -2.
5% expected and -1.
5%
prior.
Affected by the epidemic and the continuous decline in international commodity prices, domestic industrial product prices continued to decline
.

4.
According to data from the National Bureau of Statistics, the profits of industrial enterprises above designated size in the country from January to April 2020 fell by 27.
4% year-on-year, a decrease of 9.
3 percentage points
from January to March.
The decline in profits of industrial enterprises in April narrowed sharply, but from January to April, the decline in industrial profits was still obvious, and the profit situation of enterprises was still not optimistic
.

5.
According to the Bureau of Statistics, in April, the resumption of work and production continued to advance, the effect of relevant support policies continued to appear, the market demand of automobiles, special equipment, electrical machinery, electronics and other industries improved significantly, the order volume gradually increased, and profits picked up
significantly.

International aspect,

1.
The Eurozone GDP quarterly rate after the first quarter quarterly adjustment was actually announced to be -3.
8%, expected to be -3.
8%, and the previous value was 0.
1%; The annualized rate was -3.
3% in actual terms, -3.
4% expected, and 1%
in the previous month.
The lowest level in 25 years, the eurozone economy is dismal
under the impact of the epidemic.

2.
The number of ADP employment in the United States fell by 20.
236 million in April, far exceeding the previous record low of -708,000, the largest decline in history
.
Despite the record figures, the results of more than 20 million were within
expectations.

3.
Eurozone manufacturing PMI preliminary value for May was 39.
5, 38 expected, 33.
4
previously.
Eurozone business activity fell further in May, experts said, but the survey data at least offered reassuring signs that the downturn could have bottomed
out in April.

4.
Data released by the U.
S.
Department of Labor on Thursday showed that initial jobless claims last week were 2.
438 million, down
for seven consecutive weeks.
But the impact of the pandemic is still significant, with a total of about 38.
6 million people filing for unemployment benefits
in the United States in the last nine weeks.

5.
According to data from the US Department of Commerce, the annualized quarterly revised value of real GDP in the first quarter fell by 5%, which was greater than the decline of 4.
8% in the preliminary value, which was the largest quarterly decline since the worst period of the international financial crisis
.

Second, the market review

The copper market maintained a V-shaped rebound this month, but the overall rebound was less than last month, and it fell into a high volatility during the month
.
Shanghai copper continued to rebound this month, with a monthly increase of about
1,000 yuan.
In April, the domestic industrial situation continued to repair, the manufacturing PMI data remained above the boom and bust line, and the decline in industrial profits narrowed, but it is worth noting that industrial demand still lags behind production, enterprise inventories have increased slightly, and the overall industrial profit still has a year-on-year decline of 27%, coupled with the recent end of the domestic people's congress meeting, the moderate economic boost and long-term boost have become the focus, the copper market still has a strong rebound in the case of a slightly poor strong stimulus, or for the current Shanghai copper has reacted in advance to the expected economic recovery, with the expected gradual realization of the case or short-term level higher, But there will be a reduction
in momentum in the medium and long term.

In the market, spot copper rose by 1,100 yuan this month, and the premium was adjusted first and then rose, and the copper premium remained around
180 yuan.
At the beginning of the month, the domestic supply decreased, but due to the inflow of imported copper, the category of wet copper became significantly more, and it was difficult for the premium to have room to rise; In the middle of the month, during the contract exchange period of the month, due to the price difference factor, good copper once transferred to the water; In late May, it returned to high premiums, but under the influence of high prices and high premiums, market transactions gradually declined, and downstream consumption weakened
.
In terms of import profit and loss, the window opened this month, and the maximum was close to 500 yuan / ton
.
Sino-US tensions have heated up again, and the depreciation of the RMB has been large, especially at the end of the month, and the phenomenon of copper prices being strong and weak inside and outside is prominent
.

On the macro front, the domestic people's congress was held, but this time there was no GDP target, and the market bet in advance, Shanghai copper peaked to around 44,500; the potential bearish factor is the recent rise in Sino-US tensions, including the Huawei incident, the US sanctions against 33 Chinese companies, and the Hong Kong issue
.

At present, the epidemic situation in the United States is still continuing, the European region has gradually opened the economic restart, the uncertainty of Sino-US trade frictions heating up still exists, the short-term copper market trend is not obvious, next month Shanghai copper or will maintain a high volatility trend, it is recommended to continue to pay attention to the previous period of the apparent inventory outflow, the current overall inventory is close to the low level in recent years, pay attention to the subsequent outflow to judge whether the copper market recovery is expected to be fully released
.

3.
Waste market

Fuzhou small furnace started production, copper raw materials were purchased at higher prices, and local prices caught up with Quanzhou Nan'an and some copper factories; On May 18, the Solid Waste Center announced the detailed list of the 7th batch of applications for restricted imports this year, of which the total amount of copper scrap approval this time was 10,423 tons; According to the feedback of spot merchants in East China, most of the low-priced electrolytic copper that sold well in March and April has been put into production, and the outflow of production side materials will increase, or alleviate the current tight supply situation; Recently poor export orders, copper rod enterprises have started to decline, and itself has turned into the traditional consumption off-season, downstream demand has weakened
significantly.
In April, the capacity utilization rate of bright pole enterprises nationwide was about 43%, up 13 percentage points from March, and there was still an improvement
in May.
The difference between the purchase price of raw materials of North and South manufacturers narrowed, and the phenomenon of markup was significantly reduced
.

Foshan's bright copper price this month is in the operating range of 39700-40500 yuan / ton
.
In May, copper prices continued to rise, facing the opening position in recent years, the market for the future market bullish mentality weakened, and many have reached the psychological price, the inventory continued to flow out after the year, among which the processing of copper rice manufacturers is more obvious, at the end of the month Wuxi, Anhui, Guangdong and other places have the willingness to speed up the
clearance.

4.
Trend forecast

In May, the resumption of the economies of Europe and the United States was put on the agenda, and the impact of global public health events on short-term copper prices was further weakened
.
In crude oil, the OPEC production cut agreement was officially implemented, investors' concerns about serious oversupply were significantly eased, and U.
S.
crude oil soared about 73% in May, which is conducive to the recovery of commodity confidence and has a linkage effect
on copper prices.
Fundamentals, domestic inventories accelerated to dematerialize, the inventory in the previous period fell to the level of the same period of previous years under the premise of the original high base, and the inventory in the bonded area also fell to the lowest level since November last year; At the same time, the processing fee TC remained low, providing rebound momentum for copper prices
.
At present, the trend of medium and long-term divergence still exists, the market continues to promote under the fear of heights, and it is difficult to change the short-term increase in industrial demand in the medium term, and there may still be a strong performance
in the short term.

5.
Industry news

1.
Peruvian mining industry officials revealed that about 22 large mining companies in Peru are ready to gradually resume production in a few days, due to quarantine measures, Peruvian mining activity is only 35-40% of normal levels, and is expected to rise to 80%
within a month.

A spokesman for Freeport-McMoRan Inc said it "plans to reassess" operations at a copper mine in New Mexico that was temporarily closed
due to the coronavirus pandemic.
The company said last month it would cut its budget by $1.
3 billion as copper prices tumbled
as the coronavirus spread.

3.
According to news, Zambia temporarily closed its border crossing with Tanzania, and copper export business shipped through Dar es Salaam, the capital of Tanzania, was forced to delay.

4.
On May 12, the 400,000-ton high-purity copper cathode copper clean production project of Daye Nonferrous Metals Holding Group Co.
, Ltd.
, a subsidiary of China Nonferrous Metal Group, officially started, marking a substantial step
towards the million-ton domestic cathode copper production capacity of China Nonferrous Metal Group.

5.
Chile's Antofagasta said it managed to maintain its production at normal levels
, despite restrictions in Chile that temporarily reduced the number of workers due to the pandemic.
The refined copper market is expected to be oversupplied this year, but the situation remains volatile
.

6.
According to the latest monthly report of the World Bureau of Metal Statistics (WBMS), from January to March 2020, the global copper market had an oversupply of 188,000 tons, and a shortage of 268,000 tons for the whole of 2019
.
During the January-March period, reportable stocks were 316,000 mt
higher than at the end of December 2019.

7.
According to the IWCC, demand for copper, which is widely used in the construction industry and electric vehicles, is expected to fall by 5.
4% this year, but the industry body believes demand may rebound by 4.
4%
in 2021.
Refined copper production is expected to be 22.
91 million mt this year, while demand is 22.
625 million mt
.
Production is expected to climb to 24.
3 million mt in 2021, with demand at 23.
265 million mt
.
In China, the world's largest consumer of metals, refined copper demand will fall 2.
8 percent this year to 11.
87 million tonnes.

According to the IWCC, demand will grow by 2.
6% in 2021 to 12.
175 million mt
in 2021.