[institutional Review] Copper fundamentals lack of support and futures prices should not rise.

SMM net: August copper price high consolidation, the Shanghai copper index fluctuated in the range of 49520-52690, supply-side speculation continued to cool and demand is in the off-season, the fundamental driving role weakened, while the marginal tightening tendency of monetary policy also put pressure on copper prices. In the future, the macro view is neutral and slightly short, the dollar index shows signs of rebound, and the adjustment of US stocks and the fall in crude oil prices stimulate market risk aversion; as the global economy continues to recover from the impact of the epidemic, monetary policy tends to be marginal tight. It will take some time for copper supply to return to abundance, with Lunn copper inventories falling to a more than 10-year low, with some support below copper prices, while peak season demand has yet to show, focusing on the performance of domestic demand in Shuangjie and Singles Day. Therefore, the upward momentum of copper prices is insufficient and it is not appropriate to pursue higher prices.

The neutrality of the macro environment is slightly empty.

At the macro level, the United States added 1.371 million non-farm payrolls in August, better than expected and lower than the previous value; the unemployment rate was 8.4%, also better than the expected 9.8%, and the authenticity of the unemployment rate data was in doubt. After the release of the data, the dollar index rose and then fell back. There are signs of a slight rebound in the short-term dollar index, which may not be conducive to the rebound in copper prices. In addition, the rapid correction in prices brought about by long crowding in US technology stocks and the recent sharp fall in crude oil prices have suppressed market optimism to some extent. As economies continue to recover from the epidemic and monetary policy tends to tighten marginally, the Fed has made major changes in the way it sets interest rates, but the market reaction has been modest.

Manufacturing PMI in the US and Japan rose to high levels in August, while eurozone manufacturing PMI also remained above the rise and fall line. China's manufacturing PMI fell 0.1% month-on-month to 51% in August, while the index of new orders continued to rise, while raw material inventories fell 0.6%. In the later period, as demand continues to recover, enterprise raw material reserves will grow.

It will take some time to restore the supply at the mine end.

Chilean copper production fell 4.6 per cent in July from a year earlier to 468000 tonnes, of which (Codelco) production of Chile's national copper company was 133300 tonnes, down 4.4 per cent from a year earlier and up 1 per cent from a month earlier. Peru's copper production fell 2.2 per cent in July from a year earlier to 199000 tons, a significant narrowing, and the main copper mines in the country have basically returned to normal production. Last week, the smelter processing fee TC continued to remain below 50 US dollars / ton. Although copper production returned to normal, it was still dominated by replenishment orders, and it was difficult for TC to pick up significantly in the near future. Last week, my Nonferrous Network counted copper concentrate stocks in seven mainstream ports totaling 596000 tons, an increase of 50, 000 tons month-on-month. Imports of copper ore and its concentrates were 1.587 million tons in August and 1.795 million tons in July. The cumulative imports from January to August were 14.221 million tons, down 1.3 percent from 14.404 million tons in the same period last year.

Inventory falls outside and rises inside.

The domestic output of refined copper in July was 814000 tons, down 5.35% from the previous month. From January to July, the cumulative output was 5.632 million tons, an increase of 3.9% over the same period last year. In September, the smelter is less overhauled, and the output of refined copper will pick up steadily. According to the General Administration of Customs, China imported about 668000 tons of unwrought copper and copper products in August, down 12.3 percent from the previous month to 4.272 million tons from January to August, an increase of 38.1 percent over the same period last year.

In terms of inventories, LME copper stocks have continued to decline since the second half of this year, falling to 82450 tons as of September 4, the lowest level in more than a decade. Inventories in Europe have fallen significantly since mid-July, and consumption has improved after the resumption of the economy in Europe and the United States. Copper stocks have been relatively stable since August, with an increase of 6787 tons to 176900 tons last week and futures stocks of about 58600 tons. Last week, copper inventories in the Shanghai Free Trade Zone increased by 9800 tons month-on-month to 249500 tons, the fifth consecutive week of growth, according to SMM research.

Take a cautious view of peak season demand

In July, Electroweb's investment in capital construction totaled 205.3 billion yuan, an increase of 1.6 percent over the same period last year and maintained the trend of growth. According to SMM, the operating rate of refined copper rod enterprises was 72.66% in August, down 3.5% from the previous month, 2.79% from the same period last year, and the fourth consecutive decline from the previous month. It is expected that the operating rate of refined copper rod enterprises will decline further in September, and the inventory pressure of finished products in the copper rod factory will increase in August. Orders are expected to be pessimistic, so beware of the copper market's peak season. Air-conditioning production is in the off-season, orders for refrigeration copper tubes have declined, but there are double sections and "Singles Day" approaching, which is the peak season for online sales, and there is stimulation of domestic consumption at the national level, so we should not be too pessimistic. According to the China Automobile Association, car sales in August are expected to reach 2.18 million, up 3.2 per cent from the previous month and 11.3 per cent from a year earlier. The Law on the Prevention and Control of Environmental pollution by fixed wastes was officially launched on September 1. Market participants have some concerns about the import of waste after September, and domestic waste enterprises are cautious about importing waste copper. Last week, the price difference of fine waste narrowed below 2000 yuan / ton, and the replacement of scrap copper was weakened.

Prospect of the future market

As of September 1, the week COMEX1 copper non-commercial long positions increased by 5330, while short positions increased by only 78, speculative net long positions further increased, bullish sentiment is more prominent. To sum up, in terms of fundamentals, the main mines in Chile and Peru have basically returned to normal production, but it will take time for copper supply to resume; with the reduction in maintenance in September, refined copper output may rise steadily, and imports will decline slightly; with the improvement of overseas demand, LME inventory has declined rapidly, which has a certain support for copper prices, while domestic inventory accumulates slightly, which is slow. Cable consumption increment is expected to be limited, pay attention to air conditioners, cars and other durable goods consumption, cautious view of peak season demand. On the macro level, we need to pay attention to the risk of a phased rebound of the US dollar, the drag of a sharp fall in crude oil prices and the tendency of tight monetary policy. High copper prices in September are more likely to fluctuate, so it is not appropriate to chase higher, sell high and absorb low, or sell wide-span options. For reference only.

Author: qu Yajuan

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