Against the backdrop of rising inflation expectations and rising global commodity prices, the performance of domestic listed companies in the copper industry rose in the first quarter of this year. Statistics from Star Mine of the Financial Associated Press show that the 12 listed companies in the copper industry in which A shares have issued quarterly reports have all increased significantly, with an average net profit increase of 288% compared with the same period last year. Industry analysts generally believe that in the short term, under the background that it is difficult to increase the supply of international copper mines disturbed by the epidemic and the rapid growth of copper demand driven by the new energy industry, the rise of copper prices has been strongly supported. However, commodity prices, including copper, already have financial attributes, and their long-term trend will be affected by multiple factors such as the epidemic, the pattern of supply and demand and changes in global monetary policy.
After the holiday, copper prices reached a new ten-year high and reached a peak in the short term.
Data in the afternoon ended May 7 showed that Luntong closed above the $10000 mark to $10227.5 a tonne for two consecutive trading days after the Luntong Festival opened. On the evening of April 29th, LME three-month copper broke above $10000 a tonne for the first time since 2011, near the all-time high of $10190 a tonne set in February 2011. Bank of America's recent strategy said there was a risk that copper stocks across the country would be "depleted" and that copper prices could reach $20,000 a tonne by 2025. The price of the main domestic copper in Shanghai has risen to 74900 yuan / ton.
At present, copper prices are still dominated by macro factors, especially the trend of US dollar and US bond yields. The recent statement of the Federal Reserve meeting and the attitude of Federal Reserve Chairman Colin Powell indicate that the global economy is expected to accelerate the recovery and inflation will continue to rise. As a result, commodity prices will continue to be bullish. " Tong Diyi, general manager of Longsheng Fuze Asset Management Company, told the Financial Associated Press that in terms of long-term factors, the demand for electrical equipment behind the global new energy revolution, the infrastructure investment plan in the United States and the strong demand for recovery in the Chinese market have become the main factors that dominate the medium-and long-term strength of copper prices. In terms of short-term factors, there are new variables on the supply side of copper, and the epidemic situation in Peru and Chile is serious. Further tightening of epidemic prevention measures may lead to further production reduction in mines in the second quarter, and the continued contraction of the short-term supply side has intensified the upward trend of copper prices. "taken together, the high copper price in the second quarter is still a high probability event, copper price is still difficult to peak."
With regard to the future trend of copper prices, Chen Jinghe, chairman of Zijin Mining (601899.SH), believes that in the short term, with the continuous return to normal in production mines and the commissioning of new projects, the supply of copper concentrate is expected to increase gradually in the second half of 2021, the tension of copper concentrate has eased somewhat, and global total copper consumption is expected to increase significantly with the recovery of overseas markets and replenishment of warehouses, taking into account the current low inventory level. Copper prices still have strong support. In the medium and long term, the aging of existing mines, insufficient new projects and stricter environmental constraints will restrict the long-term supply of copper, while new energy vehicles and renewable energy power generation will bring large medium-and long-term increments to copper demand.
The high price of copper makes the relevant listed companies usher in a "good time". A relevant person in charge of a large listed company in the copper industry told the Financial Associated Press, "the situation in the first quarter of this year is very good. Copper prices have risen sharply. The company's annual output of 4.5 million tons of sulfuric acid has reached 470 yuan / ton, and there is a positive price difference between imported copper concentrates in China. The company's current business situation is one of the best in history. " According to statistics from Star Mine, the financial news agency, the average net profit of 12 listed companies in the copper industry in the first quarter of this year increased by 288% compared with the same period last year, including the first-quarter net profit of Western Mining (601168.SH), Tongling Nonferrous Metals (000630.SZ) and Jiangxi Copper (600362.SH).
Huaan Securities non-ferrous metals industry analysts pointed out that it is rare to see such a high copper price in history, and if the copper price continues to rise in the future, it will be very beneficial to the profits of listed companies in the copper industry. At the current copper price of $10000 a tonne, the profit per tonne of copper is about Rmb30,000, meaning the copper company is basically close to a profit margin of 80 per cent.
The tight supply of copper mine is expected to strengthen, but the long-term bull price of copper remains to be seen.
Tong Diyi believes that in the current long-term logic, the price of copper is already in the trend of a long bull. As the global carbon-neutral decarbonization trend has created a serious gap between copper supply and demand, and the demand brought about by the economic recovery has picked up sharply, massive infrastructure plans in the United States and a surge in global investment in renewable energy and electric vehicle infrastructure in the coming years, are leading to a continued increase in copper demand. On the supply side, the supply disruption caused by the superimposed epidemic has made it very difficult to increase the supply of copper mines around the world, and the speed of new mining in several major mines is not as fast as expected. The long-term mismatch between supply and demand will support the continued rise in copper prices, and the long-term bull stage of copper prices has come.
However, Huaan Securities non-ferrous metals industry analysts believe that it is difficult to judge whether copper prices enter a long-term bull market. On the one hand, the epidemic will have an unpredictable impact on the trend of copper prices; on the other hand, the length of monetary policy of central banks is also a core factor. "at present, supply is not a very important factor, because supply is mainly affected by the epidemic." What is more noteworthy is that it is expected that in the next two to three years, the currency retreating may have some pressure on copper prices. However, from the perspective of long-term demand, under the background of "carbon neutralization", the deep decarbonization of electric power and the rapid development of wind power, photovoltaic and new energy vehicles will certainly drive the increment of copper consumption.
China International Capital Corporation fixed income analysts also pointed out that the rapid rise in commodity prices is mainly affected by the continued easing and abundant liquidity of the world's major central banks, and financial market participants generally believe that copper still has room to continue to rise. However, the fundamental demand for copper has not changed much in the near future, and the increase in copper demand brought about by carbon neutralization is also a long-term trend, which has little to do with the recent rise. The supply disruption caused by the outbreak in emerging markets is the real reason behind the short-term fluctuations in copper prices.
China International Capital Corporation's analysis further pointed out that as the supply-side disturbance in South America gradually subsided, the tension in copper concentrate may ease in the middle of the year. The medium-term logic of copper is the agreed goal of climate change in the Paris agreement. under the trend of carbon neutralization, copper has replaced oil as the new main function of energy supply, so oil prices are lagging behind and copper prices are leading the way. According to the projection of 50kg copper per new energy vehicle, the withdrawal of all fuel passenger vehicles and the sales of 20 million passenger vehicles per year by 2030 means that the annual demand for copper will increase by 1 million tons, compared with the current national apparent consumption of more than 10 million tons, the increase is considerable, but the supply is not so much increased. This will drive the copper industry companies to maintain a high demeanor, but the copper price is affected by monetary policy and other internal and external factors, the trend remains to be seen.
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