Affected by news of a border blockade by Chile, a major copper producer, Lunn copper prices rose 3.6% on April 6, breaking through the $9000-a-ton mark. However, copper prices have not risen as expected since then, with copper futures trading at $8969.75 in London as of 22:00 domestic time.
In this regard, industry insiders analyzed to reporters that the border blockade news is expected to have little impact on the balance of copper supply and demand, and the increase in copper inventory is the main reason for restricting the upward price of copper, as it is still in the stage of copper price digestion, the increase in inventory will also limit the upward space of copper price to a certain extent.
As for the current situation, a senior executive of a copper foil production company in Anhui told the Financial Associated Press that it is hard to say whether the copper market has entered Changniu or a "supercycle". Lun Copper has been consolidated for a long time between $8000 and $9000, and the market is likely to continue.
Chilean policy has limited impact on copper prices
The epidemic policy in copper-producing countries is the cause of concern about copper prices this time. On the news, in view of the grim situation of the rebound in the epidemic, and in response to the sharp increase in the number of cases caused by novel coronavirus, the Chilean government decided to close the border from April 5 to May 1, allowing international transportation only for urgent, humanitarian or medical purposes.
According to the data, Chile accounts for 1/4 of the world's copper production in mines, with an output of more than 5.8 million tons in 2020. As a result, Lun copper futures closed 2.64% higher on April 6, breaking through the $9000 per ton mark and closing at $9040.25.
At present, the Chilean Ministry of Energy and Mines responded that the border closure will not affect the normal operation of mining companies. Industry analysts also believe that the news of the border blockade is expected to have little impact on the balance of copper supply and demand. Lun Copper reported a slight correction on April 7, closing at 89.315 million yuan, down 1.2% from the previous trading day.
The price of copper futures in Shanghai also fell slightly on April 8, with the main contract 2106 closing at 66970 yuan / ton, down 250 yuan, or 0.37%. At 15:00 on the same day, March copper in London was quoted at US $9005.00 / tonne, while the internal / external ratio between Shanghai and London was 7.44, lower than 7.45 on the previous day. Shanghai copper futures fell more than the London market.
Analyst Wang Wei told reporters that with the spread of global vaccination, copper enterprises gradually restore capacity that had been damaged or delayed due to the epidemic, supply capacity continues to recover, and the supply gap shows a shrinking trend.
Wang Wei believes that as a major copper producing area, the news of the border blockade will mainly have an impact on the global supply of copper, but it is mainly hype at the expected level. Unlike the reduction in production caused by the epidemic that has been hyped since last year, the Chilean blockade is limited to the flow of people, the impact of the mining industry is relatively limited, and the impact is not expected to last long.
In this regard, the above-mentioned Anhui copper foil production company executives told the Financial Associated Press that the impact of high copper prices on the company is positive, the company plans to continue to increase copper mine self-sufficiency rate, enhance profitability. Under the trend of carbon neutralization, new energy vehicles and other downstream will achieve better development. At the same time, the export of mechanical and electrical products in China has increased, which plays an important role in supporting copper consumption.
Copper inventory suppresses copper price to rise
Industry analysts believe that the increase in copper inventory is the main reason to limit the upward price of copper. According to data released by the London Metal Exchange (LME), copper stocks on the London Metal Exchange have continued to recover from a low of more than 70, 000 tons since March, rising to 142550 tons as of Tuesday, a three-and-a-half-month high and up more than 90% in March.
Wang Wei told reporters that the current existence of global copper banks has now entered restorative growth after experiencing a low at the beginning of the year, which is also a response to the current high copper prices. At present, it is still in the stage of copper price digestion, and the increase in inventory will also limit the upward space of copper price to a certain extent.
Huatai Securities in the latest research report that from the financial nature of the sustained inflationary pressure, the dollar will not trend to rise will support the copper price. In terms of smelting, copper concentrate may continue to be in short supply, smelting costs that remain depressed may continue to be under pressure, and copper enterprises with higher copper ore self-sufficiency are expected to benefit from rising copper prices.
However, Wang Wei believes that the factors that will affect copper prices in the future will be mainly from a macro perspective, and the control of the global epidemic is still a top priority, which is directly related to the recovery of copper demand. The central bank's monetary and fiscal policy changes will also have an impact on financial markets, which in turn will guide copper prices.
At present, Jiangxi Copper (600362.SH) is the largest comprehensive copper production enterprise in China, with an annual output of more than 200000 tons of copper concentrate and the highest self-sufficiency rate of copper concentrate in China; Tongling Nonferrous Metals (000630.SZ) produced 27500 tons of copper concentrate in 2020, an increase of 0.73 percent over the same period last year, and 688300 tons of cathode copper; Yunnan Copper (000878.SH) produced 1.309 million tons of cathode copper in 2020.
