Sitting on Two Good Things, Copper May Come Back

Since the beginning of the year, the leading commodity copper has disappeared after a period of time. Under the influence of macro-interference factors, copper assets have performed poorly in the past three months. Insiders pointed out that under the current macro attention, the market turned a blind eye to the copper market. First, the copper concentrate processing fee TC continued to decline, and second, the copper market inventory continued to decline. In the future, these two factors may push up the price of copper at any time.

Two factors or push up the price of copper

This week, Shanghai copper futures fell sharply.

According to relevant data, the average operating rate of copper in April increased by 1.37 percentage points from the previous month and decreased by 4.89 percentage points year-on-year.MM expects the average operating rate of copper in May to increase by 3 percentage points from the previous month, and is expected to rebound year-on-year. At present, the market has certain expectations for the slow and stable consumption of copper downstream. 

Insiders pointed out that at present, the copper foil market has two important indicators worthy of attention. One is the decline in copper concentrate processing fee TC, and the other is the inventory change in the copper market. “Once the macro interference subsides and the market sentiment is stable, these two factors may bring a huge market to the copper market at any time.”

“The continued decline in copper concentrate TC continues to strengthen market concerns about copper supply.” China Merchants Securities Research pointed out that market participants recently said that prices below $60/ton have also appeared. Previously, the market generally expected TC to fall below $60/ton. It is expected that the support for copper prices will be limiteduntil the mainstream TC price falls below $60 . However, if it falls below this level, it is expected to increase confidence in the trend of copper prices. Currently, TC is continuing to approach the psychological defense of this market.

In addition, as the price difference between refined copper and scrap copper continues to narrow, the degree of substitution of refined copper for scrap copper has increased significant. According to the research of China Merchants Securities, considering the current peak of centralized maintenance in smelters, It is expected that the de-stocking speed of refined copper is expected to accelerate, and it is recommended to pay attention to the advantages of copper resources. 

Waiting for the macro disturbance to weaken

In the case of little change in the consumption side, industry insiders pointed out that behind the recent copper market destocking, the main consideration is supply-side changes.

“The expected tightening of copper concentrates has increased, and the spot TC price has dropped to US$64.5/ton. It is reported that TC has affected the production of some small and medium-sized refineries. The maintenance in May continued, and the current Global water inventory is still in the process of de-construction. It is expected to last for about one month. This year, the import of waste seven types of copper foil has been banned. From July 1st, the waste six categories will also be Classified as restricted imports. although some enterprises have already submitted applications, no approval has been issued yet.

The lifting of the scrap copper supply will promote the consumption of refined copper, speed up the de-stocking, and provide support for Copper prices .” Research indicates that.

Analysts analyzed that macro expectations have been fluctuating repeatedly, and copper prices have been dragged down. However, with the “boots” landing, market differences have gradually increased, and short-term fluctuations are unpredictable. From a fundamental point of view, Chen Minhua Said that the copper mines are slowly starting to appear, and domestic overhaul will inevitably lead to tighter spot supply in the later period, with the impact of superimposed scrap copper supply , and the supply end support is more obvious. Judging from the demand side, The recent sharp drop in copper prices has slightly promoted downstream bargain hunting, but actual consumption is unlikely to be substantially improved in the context of the current macro-worry mood. Short-term copper prices are concerned with The support of around $6,000/ton, and it is recommended to wait and see on the operation.

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