Weak demand and a strong dollar Copper prices remain under pressure

On the macro front, since the fourth quarter of 2019, the market has strong expectations for the recovery of China and the Eurozone, China's official PMI has been above the 50 boom and bust line for three consecutive months, and the Eurozone manufacturing PMI has stopped falling and rebounded and gradually approached the boom and bust line
.
However, affected by the epidemic, the domestic economic data in the first quarter is likely to weaken, which poses an external risk
to the European and American economies.
In addition, dragged down by Germany, the euro area economic prosperity index is weak, which is positive for the dollar index, which continues to update highs, approaching the 100 yuan mark, and then putting pressure on Luncopper
.

The most direct and important impact of the epidemic on the fundamentals of electrolytic copper is the delay in resuming work, with most companies delaying the resumption of work by more than
10 days.
The postponement of the resumption of work has limited impact on smelters, but has a greater
impact on downstream copper processing enterprises.
Smelters tend to maintain normal production as planned during the Spring Festival, while downstream processing enterprises generally postpone the start of work after February 10 at the request of local governments, and even if work resumes, most enterprises do not substantially put into production
due to personnel isolation and strict logistics control.

According to the seasonal pattern, SHFE stocks will accumulate significantly around the Spring Festival and last until early March, after which they peak and fall.

In 2020, due to the slow resumption of production progress of copper downstream enterprises, the accumulation range and time of domestic refined copper stocks are likely to exceed expectations, the spot high discount, and the Contango structure will be maintained in the near and far months, which will put obvious pressure
on short-term copper prices.
As of February 21, the apparent stock in the previous period was 298619 tons, an increase of about 143,000 tons from the 155839 tons
on January 23, before the Spring Festival.

But in terms of overall inventory levels, there was a significant decline in 2019, with LME, COMEX, SHFE and copper stocks in the Shanghai Free Trade Zone falling from 1 million tonnes at the beginning of the year to a low of 520,000 tonnes in December, a 48%
decline for the year.
From the perspective of the pace of destocking, global inventories began to accelerate their decline from August, breaking through a four-year low
.
In the later stage, waiting for the marginal recovery of demand, copper price elasticity can be expected
.

The market has experienced high risk appetite and rising stock market optimism under the continuous countercyclical adjustment of the central bank, but has begun to reassess the negative impact
of the epidemic on the economy.
Suppressed by the strength of the US dollar and weak demand, the restorative rally in copper prices will come to an end
.
At the same time, low overall inventories and poor smelting margins have provided bottom support
to copper prices.
It is recommended to operate in the range of 45,000-46,500 yuan / ton in the short term, and when it is below 45,000 yuan / ton, the middle line can be arranged in batches
.