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The downward pressure on the domestic economy has increased, the strong dollar and the transformation of supply and demand structure have become the main factors suppressing copper prices in the near future, with weaker domestic spot prices, inventories beginning to accumulate and Shanghai copper term structure shifting, copper prices will start a new round of decline
.
Driven by favorable factors such as low inventories, tight spot and the phased easing of trade frictions, Shanghai copper once soared
.
However, downstream demand shrank rapidly after the National Day; Under the combined effect of the gradual release of new production capacity and the resumption of production by pre-maintenance enterprises, supply began to increase month-on-month; The spread of superimposed refined copper scrap has widened to promote the replacement of refined copper consumption by copper scrap, and the domestic supply and demand structure of refined copper has changed
.
In the later stage, copper prices will begin a new round of downward trend, looking around 46,000 yuan / ton within the year
.
Domestically, the official manufacturing PMI released recently fell again to 50.
2 in October, the lowest since
July 2016.
In addition, the year-on-year GDP growth rate in the third quarter also fell to 6.
5%, the lowest since
the 2008 financial crisis.
In this context, the downward pressure on the domestic economy continues to increase
.
At the same time, the automobile and air conditioning industries, which reflect the living consumption level of residents, weakened significantly, and sales in September fell by 11.
55% and 8.
2%
year-on-year, respectively.
As the macroeconomy weakened, market expectations of fiscal stimulus also rose
.
The Politburo meeting on October 31 reignited market discussions
on infrastructure and tax cuts.
Considering the inertia of the economic downturn and the lag of policy stimulus, the macroeconomy is still not optimistic
during the year.
In addition, the current "anti-globalization" thinking and trade protectionism will continue to drag down the global economic recovery, and the Sino-US trade frictions show no signs of easing in the short term, and the impact of trade frictions has gradually been reflected in the
real economy.
At the same time, the US economy is thriving, and the pace of Fed interest rate hikes is accelerating
.
The U.
S.
dollar index remained strong driven by both economic and policy efforts, recently breaking through 97 to hit a new high
for the year.
A strong dollar not only exposes emerging countries to the risk of capital outflow and exchange rate depreciation, but also suppresses risk assets such as U.
S.
stocks by the Federal Reserve, and market concerns about U.
S.
stocks will further intensify
with the increase in interest rates.
In terms of inventory, the new smelting capacity in 2018 was 1 million tons, of which 650,000 tons were put into operation in August-September, and the new capacity began to gradually release production in October, and production will peak
in the first quarter of next year over time.
In addition, from August to September, there were many large-scale smelter maintenance, and with the completion of Jiangtong and Daye maintenance, no large-scale smelters were planned for
maintenance.
According to SMM's research, production in October is expected to increase by 14,800 tons from September to 731,600 tons
.
At the same time, the price difference of refined copper scrap has widened significantly from 600-700 yuan / ton in early September to more than 1500 yuan / ton, and the economic benefits of copper scrap have rebounded significantly, and enterprises have increased the use of scrap copper to squeeze out the consumption
of refined copper.
From the perspective of consumption, it is difficult to have bright
spots in subsequent consumption.
The cumulative completion of grid infrastructure investment fell by 9.
6% year-on-year, although the decline has narrowed, but it has not yet seen infrastructure development
.
The automotive and air-conditioning industries are less subject to state regulation and deleveraging, but real estate remains resilient from data such as real estate investment and housing starts
.
Overall, there were few bright spots in consumption during the year, except for infrastructure investment expectations, and the slowdown in consumption growth was basically certain
.
From July to September, domestic copper stocks showed a reverse seasonal destocking, driven by the obstruction of copper scrap consumption, and the copper stocks in the previous period continued to decline from 264,000 tons at the end of June to 111,000 tons in late September, the lowest level
in recent years.
However, with the widening of the price difference of refined scrap copper, superimposed on the phased change of supply and demand structure, domestic copper stocks will show a trend accumulation
.
At the same time, some changes in market expectations can also be found from the changes
in the term structure of Shanghai copper.
Before September, spot showed strong resilience, and with the synchronous rebound of copper prices, spot support is difficult to maintain, indicating that Shanghai copper will return to a weak pattern
.
