November 2019 cable raw materials (copper) monthly report

First, the macro aspect

Domestically,

1.
Data released yesterday by the China Federation of Logistics and Purchasing and the Service Industry Survey Center of the National Bureau of Statistics showed that the manufacturing purchasing managers' index (PMI) in October was 49.
3%, down 0.
5 percentage points
from the previous month.

2.
On November 11, China's social financing scale in October was 618.
9 billion yuan, compared with 2.
27 trillion yuan in the previous value; In October, new RMB loans amounted to 661.
3 billion yuan, compared with 1.
69 trillion yuan in the previous month.
The social finance data fell more than expected, indicating that the downward pressure on the economy increased
.

3.
According to data from the National Bureau of Statistics, from January to October, the total profit of industrial enterprises above designated size in the country was 5.
01510 billion yuan, down 2.
9% year-on-year, and the decline was 0.
8 percentage points
larger than that from January to September.
In October, the profit of industrial enterprises fell by 9.
9% year-on-year, which was wider than in September, mainly affected by factors such as the expansion of the decline in the ex-factory price of industrial products and the slowdown in production and sales growth
.

International aspect,

1.
The final manufacturing PMI of the Eurozone manufacturing PMI in October was 45.
9, better than expected, and slightly up from the final value of 45.
7 in September, but still below the boom-bust line
.
Eurozone manufacturing data hit a seven-year low in October, indicating that the commodity production sector will seriously drag on the region's fourth-quarter GDP data
.

2.
The ISM non-manufacturing PMI rose to 54.
7 in October from 52.
6 in September, beating expectations as indicators of employment, orders and business activity improved
.
While current levels are close to this year's average, they are still well below the 2018 average, in line with slowing economic growth
.

3.
The Eurozone economic sentiment index recorded 101.
3 in November, compared with 101 expected and 100.
8
in the previous month.
Eurozone economic confidence rebounded more than expected in November due to optimism in key service sectors and good consumer sentiment towards industry advertising, further suggesting that the region may have weathered its worst recession
in recent times.

Second, the market review

The volatility of copper prices this month narrowed further, and the main operating range of Shanghai copper was 4.
67-47,600
.
At the beginning of the month, the domestic central bank cut interest rates, while the Ministry of Commerce said that the two sides agreed to cancel the tariffs in phases as the agreement progressed, and copper prices were boosted to support the rebound
.
The preliminary value of the manufacturing PMI in the euro area in October was only 45.
9, the largest decline in 7 years, and the GDP in the fourth quarter will still be dragged down; and after the Fed cut interest rates three times, the tone changed, the economy made good remarks to support the strong operation of the US dollar, and the domestic social finance data, fixed asset investment, and industrial added value in October all fell more than expected, and copper prices once stepped back around
46,700.
However, with the finalization of TC/RC processing fees in 2020, TC processing fees have declined, scrap copper imports have fallen sharply, and global inventories have reduced and other factors have supported the bottom of copper prices, and the center of gravity of copper prices has moved
up again at the end of the month.
It is also worth noting that the unrest in Chile is still continuing, and if the dispute continues to expand, it will affect
the supply side.

In terms of the market, the Shanghai copper premium has not changed much this month, and the good copper premium has remained around 100 yuan
.
At the beginning of the month, corporate funds were abundant, copper prices were relatively low, and market activity increased, but not for long
.
Affected by poor demand, downstream enterprises maintain rigid demand, traders speculate around 47,000 high enthusiasm to enter the market, and gradually show a tug-of-war situation in the later stage, the overall transaction is limited, and the premium is limited in the case of strong willingness of merchants to raise prices
.

In terms of import profit and loss, the window is still closed this month, and the gap is maintained around
200 yuan / ton.
Although Sino-US trade is frequently positive, the first phase agreement has not been implemented, the RMB exchange rate briefly stood at the "7" mark and then depreciated again, and the US dollar is expected to operate
strongly supported by strong economic data.
The continued closure of windows and the reduction in the supply of imported goods also prompted spot traders to raise prices
.

3.
Waste market

Copper prices are generally in a narrow range this month
.
The main operating range of Shanghai copper is around 46800-47300 yuan / ton, and the mainstream price of bright copper in the market is 43000-43300 yuan / ton
.
Up to now, the price difference of refined waste has reached around 1500 yuan, and there has not been a large fluctuation overall, and the supply of scrap copper continues to be tight, and the price is still firm
.

The transaction situation of the scrap copper market is mainly light, the copper price rebound is weak to maintain a narrow range of shock market, the sentiment of holders waiting and waiting to cover goods is still high, and so on rebound opportunities; However, there are also a small number of holders due to the tight operation of funds at the end of the year, forced to sell at a loss, but the market scrap copper supply pressure has not eased, downstream copper manufacturers into the market to find goods actively, especially near the end of the year of the increase in demand for stocking, some manufacturers do not hesitate to increase the price of purchase, but finished copper consumption is not good and price profit continues to shrink, in addition, it is understood that the purchase price of scrap copper manufacturers in Henan, Tianjin and other regions continues to remain unchanged, resulting in greater pressure on manufacturers, and maintain a semi-operational state
.

4.
Trend forecast

This month's news is long and bearish, the downward pressure on the macroeconomy continues, and copper prices maintain a range-bound trend
.
Sino-US trade talks have revived, China and the United States agreed to phase out tariffs as the agreement progresses, Trump said that the first phase of negotiations has reached the last minute, but market sentiment has been less mobilized, and whether a deal can be reached within the year has become the main concern
.
The domestic central bank cut interest rates four times in the month, the financial commission instructed to strengthen the counter-cyclical adjustment policy, with the gradual landing of the policy, the overall support of Shanghai copper gradually formed, but from January to October, the profits of industrial enterprises above designated size in the country fell by 2.
9%
year-on-year.
In summary, it is expected that Shanghai copper will maintain a strong trend of volatility next month, and the price center of gravity will stabilize with the gradual landing of the policy, but the macroeconomic pressure is huge, and the manufacturing PMI in November may be difficult to pick up sharply under the condition that Shanghai copper power may be insufficient, it is recommended to continue to pay attention to Sino-US trade negotiations, or the copper price is favorable to form a certain supplement
.

5.
Industry news

1.
Mining company Freeport McMoRan Inc and three Chinese copper smelters reached an agreement to cut annual processing and refining expenses (TC/RC) by 23% in 2020, pushing the industry benchmark to a nine-year low
。 Freeport Copper was traded at the same price as Jiangxi Copper, Tongling Nonferrous Metals and China Copper in three separate deals, with miners paying smelters $62 per tonne for processing ore into refined metals at $6.
2 cents per pound, down from $80.
80 per tonne and 8.
08 cents per pound in 2019, reflecting tight concentrate supply and increased processing capacity in China
.

2.
Chile's export earnings plunged by a fifth to $5.
3 billion in October, an early sign of recession as the South American country suffered its worst turmoil
since democracy was restored in 1990, according to data released by Chile's central bank.
Weeks of sporadic violent protests, riots, arson and looting in San Diego and elsewhere have killed at least 23 people and cost businesses more than $1.
5 billion
.

3.
According to data released by the General Administration of Customs of China, China's copper scrap imports in October were 86,600 tons, down 44.
1% month-on-month and 53.
1%
year-on-year.
China's copper scrap imports from January to October were 1.
33 million tons, down 35.
43%
year-on-year.

4.
According to data updated on the website of the National Bureau of Statistics, China's refined copper (electrolytic copper) output in October was 68,000 tons, a year-on-year increase of 17.
9%; The total output of refined copper from January to October was 7.
831 million tons, up 8.
1%
year-on-year.
Copper output in October was 1.
719 million tons, an increase of 18.
0% year-on-year; The total output from January to October was 15.
861 million tons, up 9.
8%
year-on-year.

5.
Rio Tinto faces renegotiating the terms of its agreement for its copper project in Mongolia after lawmakers approved plans to amend the agreement to make it more favorable to Mongolia
.
Mongolia's largest overseas investment project, the Oyu Tolgoi mine, has been delayed and costs have soared, leaving the government impatient with revenue, while Rio Tinto says it has invested billions of dollars
.

6.
Freeport-McMoRan, along with Jiangxi Copper and Tongling Nonferrous Metals, cut annual processing and refining fees (TC/RCs) by 23% in 2020 to $62/t and 6.
2 cents/lb from $80.
80/mt and 8.
08 cents/lb in 2019, reflecting tight concentrate supply and growing
processing capacity in China.