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[SMM Analysis] the collapse in oil prices has dragged down the short-term diving of copper prices and still has upward momentum for a long time.
Jul 14,2020 10:45CST
translation
Source:SMM
Copper prices showed a sharp correction at the start of trading this morning, dragged down by the collapse in international oil prices. As of 9PUR 30, Lun Copper closed at US $6439.5 per ton, down US $106per ton, or 1.62 per cent; Shanghai Copper 08 contract closed at 51910 yuan per ton, down 450yuan per ton, or 0.86 per cent. Global liquidity easing is expected to superimpose the strength of copper's own fundamentals, and copper prices still have long-term upward momentum.
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SMM7 March 14:

Copper prices showed a sharp correction at the start of trading this morning, dragged down by the collapse in international oil prices. As of 9PUR 30, Lun Copper closed at US $6439.5 per ton, down US $106per ton, or 1.62 per cent; Shanghai Copper 08 contract closed at 51910 yuan per ton, down 450yuan per ton, or 0.86 per cent.

The downgrade of OPEC+ production reduction forecast is the main reason for the collapse of oil prices. In the early hours of yesterday morning, Saudi Arabia proposed that the OPEC+ discuss cutting production from 9.6 million b / d to 7.7 million b / d at its meeting on July 15. The possibility of another increase in supply against the backdrop of high inventories drove the long positions of crude oil down, and the plunge in oil prices also led to a fall in the prices of other major types of risky assets. In addition, the number of new crown infections in the world continues to hit record highs, and the prospect of crude oil demand repair is again overshadowed. Double concerns about supply and demand will be a drag on the recent performance of oil prices.

International oil prices fell across the board yesterday. NYMEX crude oil futures closed down 2.34% at $39.6 / ton, falling again below the important $40 / barrel mark, while cloth oil closed down 2.38% at $42.21 / barrel.

As important industrial commodities, copper and crude oil are obviously affected by macro fluctuations and show synchronization most of the time. In March, against the backdrop of the worsening epidemic, copper also fell by the limit of two consecutive times, dragged down by the collapse in oil prices. At a time when the current contradictions in the crude oil market are prominent, it is expected that copper prices will break away from their own fundamentals and adjust with oil price fluctuations in the short term.

In the long run, copper prices are expected to remain unchanged. Global liquidity easing is expected to superimpose the strength of copper's own fundamentals, and copper prices still have long-term upward momentum. On the macro front, the tone of optimism continues, the global economy is still in the process of recovery, and policy easing is expected to remain. The US budget deficit hit a record $864 billion in June yesterday, while the French finance minister said it would take large-scale support measures to boost employment. Fundamental copper prices continue to show strong support. Chile, Peru mine side by the epidemic interference news, wage negotiations may trigger a "strike" to further aggravate mine supply concerns. The tight supply of domestic copper concentrate is expected to be transmitted to the electrolytic copper supply port, and the tight domestic supply contributes to the rise in copper prices. Domestic consumer performance continues to be stable, according to SMM research, the domestic copper comprehensive operating rate of 77.72% in June, although weak month-on-month, but still 1.78% growth compared with the same period last year. Therefore, in the long run, waiting for oil prices to stabilize and copper prices to return to their own factors, macro and fundamentals will support copper prices to continue to rise.

(SMM Zhu Ruoyi)

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