Dr. hottest copper strongly stirred up ripples in

2022-10-18
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"Dr. copper" strongly stirred up "ripples" in the spot circle

copper prices hit strongly, and Shanghai copper futures have risen by more than 3000 yuan/ton since June, rippling in the spot circle. The insider said, "the copper price was overwhelming in just a week. Small and medium-sized wire and cable enterprises raised their sales quotations, and the downstream demand enterprises were not well stocked. Seeing the rise in cable prices, they were caught off guard. The next family who prepared to order in the early stage but did not pay the deposit regretted it, and had nothing to do in the face of the price rise."

at present, the market is divided about the future of copper prices. Analysts said that the conditions for a sustained bull market to rely on the continuous amplification of the contradiction between supply and demand are still unclear, and the slow rise of range shocks may be closer to the reality

Since May 31, Shanghai copper futures have surged, reaching 54580 yuan/ton, a new high in more than three months. Then there was a correction. As of the closing on June 12, it closed at 53970 yuan/ton, with a cumulative increase of 5.62%, and a cumulative increase of 3040 yuan/ton

"There are many reasons for the copper price rebound this time. The direct reason is that the Escondida copper mine opened, that is, turning on the power switch and the machine didn't respond and starting a new labor negotiation. Escondida copper mine is a large open-pit mine in the world, with an annual output of 1million tons. At the beginning of last year, because the labor negotiation failed to reach a consensus, the copper mine went on strike for 44 days, resulting in a decline in output of 180000 tons. On June 1 this year, the two sides resumed negotiations, and the trade union proposed to issue huge awards The demand for a 5% salary increase in Jinji is the highest salary demand in Chile's history, and the market believes that the negotiation will be very difficult. Therefore, the fear of another strike became the direct trigger for the rise in copper prices in June. " Chehongyun, chief nonferrous analyst of the state investment and trust research institute, said

both sides are already in active coordination. According to the new news, the management of Escondida copper mine gave an initial reply to the plan proposed by the trade union, but it was not announced. The negotiation plan will continue until July 24, which may take longer, or continue to support the copper price

Che Hongyun pointed out that in addition to the reasons for labor negotiations at Escondida copper mine, Vedanta began to close its 400000 ton Indian Smelter at the end of March. In May, the local government ordered its permanent closure, which brought support to the basically balanced market. This can be reflected from the LME spot upgrade

since this year, LME copper spot has maintained a high discount of about $40, but since the middle and late May, LME spot discount has been tightened rapidly, and turned into a premium in June, with a premium of $12 on June 8. LME inventory also fell by 15000 tons to 300000 tons in June

Cao Yang, senior analyst of nonferrous metals at the Dongzheng Derivatives Research Institute, added that domestic environmental supervision has become stricter, and the supply of some smelters producing crude copper from scrap copper has been limited. The tightening of crude copper supply is expected to rise, which is also one of the drivers of the rebound in copper prices. In addition, the weakening of the US dollar index and better than expected domestic macroeconomic data also supported copper prices

"whether it's salary negotiation or environmental protection supervision, the impact on supply is relatively short-term. Next, it's unlikely that a large-scale strike will occur again. After all, it's not in the common interests of the government, management and workers. The impact of environmental protection supervision on crude copper supply will last for a long time or until July. As these factories resume production in succession and Zambia's crude copper supply returns to normal, the domestic crude copper processing fee will stop falling and stabilize." Cao Yang said

downstream enterprises were caught unprepared

due to the rapid rise in prices, some people in the spot market said that there was a phenomenon of "quotation changing every day" in the current spot market, and even "customers quarreled (hesitated in the early stage, the contract was not signed), and manufacturers complained (the deposit did not arrive, voided and repriced)"

in this regard, Che Hongyun said, up 25 Power supply voltage: 220V (single phase) is exaggerated. Because the domestic copper market has been very mature, the copper industry has experienced severe fluctuations in copper prices for a long time, and the trade in the industry has been very standardized

"It is common for copper manufacturers to compete for a price difference, but it is very rare to break the contract after pricing, because at present, those who can do copper business are enterprises with better qualifications. When the industry is doing business, the degree of attention to enterprise qualifications is much higher than the contract price. If the enterprise violates the contract once, this customer will be on the blacklist of the industry, and it will be difficult to do business in the future. Therefore, this kind of thing of 'customers make trouble, manufacturers complain' It's rare. " Che Hongyun said

"the copper price was unstoppable in just a week. Small and medium-sized wire and cable enterprises raised their sales quotations, and the downstream demand enterprises were short of stock. Seeing the rise in cable prices, they were caught off guard. While the next family who prepared to order in the early stage but did not pay the deposit regretted it and had nothing to do in the face of the rise in prices." Liu Chao, an analyst at BOC International Futures, said

in the wire and cable industry, the cost of raw materials accounts for more than 80% and the net profit is less than 5%. It is a heavy material light industry, with a high proportion of raw materials and low technical content

"but this kind of passive price adjustment only occurs in some small and medium-sized cable enterprises, because large wire and cable enterprises adopt the quotation mode of raw materials + processing fee, and the processing fee is fixed. The raw material price is put into the second and third sample grids in the same way to follow the market." Liu Chao said

Cao Yang said that the copper price continued to rise in the short term, and the operating pressure of enterprises in the middle and lower reaches of the industrial chain increased. The core problem is that when the terminal demand turns weak, it is difficult for the middle and lower reaches to smoothly pass on the price rise. Facing the sharp fluctuation of short-term price, enterprises should participate in hedging more to hedge the risk of price fluctuation

Liu Chao pointed out that both large cable enterprises and downstream users locked copper prices through hedging, reasonably avoiding the risk of fluctuations in raw material prices. The downstream of small enterprises is dominated by retail investors, and there is no effective hedging to avoid risks. When the fluctuation of raw material price increases, its profits fluctuate greatly, and the enterprise can only listen to fate. At the same time, hardness is a performance index to measure the hardness of materials. Small and medium-sized enterprises are relatively short of funds, which will also have an uncertain impact on production and operation. From the perspective of the copper wire and cable industry as a whole, at present, large wire and cable enterprises occupy an absolutely dominant position in the industry. After years of trial and error, their pricing model and hedging risk control strategy are very mature, and the fluctuation of raw material prices has long had little impact on Enterprises

tight balance, consolidate the rebound foundation

"This year, the overall fundamentals of the copper market are in a tight balance. In terms of consumption, the growth rate of copper consumption throughout the year remains at a good level, with the growth rate of developed countries faster than last year and the growth rate of developing countries slowing down. In terms of supply, the global copper supply will be better than last year, mainly because last year's base is low, this year's copper production growth is large, and China's smelting capacity is expanding, so the copper supply is guaranteed. However The variable is that the supply of copper scrap in China is tightening. On the one hand, it is related to the ban on the import of seven categories of scrap. In addition, domestic environmental protection continues to restrict the production and consumption of copper scrap, which is replaced by refined copper. " Che Hongyun said

Che Hongyun believes that based on the strong growth of the global economy and the expectation that the fundamentals of copper will also improve, Lun copper is still likely to challenge last year's high of 7300 US dollars/ton. If it can successfully break this price, the copper price will rise to 7500 US dollars/ton or even 8000 US dollars/ton. Correspondingly, the domestic Shanghai copper futures price may continue to rise to 56000 yuan/ton or even 60000 yuan/ton

Cao Yang said that at present, the market has great differences on the fundamentals of copper supply and demand. In the medium term, the relative tension of raw materials will not continue to deteriorate. After the supply interference is weakened, the recovery of raw material supply will help to alleviate the current tension. If there is no significant restriction on the raw material side in the second half of the year, the growth rate of global refined copper production, especially in China, is difficult to shrink significantly. The release of high supply must be digested by the synchronous growth of demand. In the second half of the year, there is not only no significant growth on the demand side, but also a certain downward pressure on the demand side. Fundamental changes are difficult to support the continuous rise of copper prices, not to mention the potential impact of macro bad in the second half of the year. For the price trend of the whole year, the judgment of maintaining the previous high and then low remains unchanged

"all major domestic smelters have sufficient concentrate inventory, and the supply of raw materials is relatively stable. The operating rate of downstream copper processing enterprises in the peak consumption season has increased year on year, large and medium-sized enterprises have full orders, the terminal operating rate has increased steadily, and the market supply and demand are booming." Liu Chao said

in the short term, Liu Chao said that the result of the strike has not been determined, and the positive and negative changes in an instant, and a short-term huge shock in copper prices is inevitable. Looking forward to the second half of the year, the global economy will resume growth, inflation will hit, domestic terminal demand will be stable, and the space for copper price to fall is very limited, with a high probability of rise. However, the conditions for a sustained bull market to rely on the continuous amplification of the contradiction between supply and demand are still unclear, and the slow rise of range shocks may be closer to the reality

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