Guotou Anxin Futures: the copper market is strong on the outside, weak on the inside and strong on the outside.

SMM News: last week, the copper market is still strong outside and weak inside. LME copper prices continue to move up under the premise of support, and the domestic copper prices are getting narrower and narrower in the concussion range in the convergence triangle. The trend of LME forcing the air continues. Although inventories have increased by 3350 tons, the historically low inventory of only 78900 tons is still the strength for foreign countries to be bullish on copper prices. in root, foreign countries regard the growth of Chinese consumption as the main reason for the rise in copper prices. In China, on the contrary, the peak season of domestic consumption is sluggish, the inventory of finished products of enterprises is overstocked, the import window is closed, and the domestic and bonded areas are increased during the peak season. All these have become the reasons why the domestic market is weaker than the outer disk, and what is more interesting is that the reason for being optimistic about the copper price at home is the loose policies abroad. Looking at the flowers in the fog, each other looks so beautiful, but when you look at it in a transposition, it turns out that it's just like this. In view of the rational return of domestic consumption and the second wave of the epidemic in foreign countries, the possibility of a decline in the copper market increases before the emergence of new stimulus policies. Technically, LME has a rising wedge-shaped trend, the domestic is still in the convergence triangle, the outer disk rose and fell back on Monday, under the premise that the above resistance is effective, we tend to copper prices to continue to fall more likely. Sell short near the resistance level in the transaction, but you should make a good stop loss.

I. FED meeting drawing cake epidemic needs new stimulus policy

Last week's FED meeting left interest rates unchanged and hinted that it would last until 2023, maintaining $120 billion a month in government bonds and MBS purchases, with a long-term inflation target of an average of 2 per cent. The meeting, as expected, did not expand the stimulus, and the next meeting will not be held until November, and there is no new hope for monetary policy for the time being. The new fiscal stimulus in the United States is still fruitless, and against the backdrop of weakening consumption and employment, the impact of the second epidemic has to be considered. At present, the United States is in the hot period of the general election, it is estimated that before the emergence of major problems, it is unlikely that a new fiscal stimulus policy will be introduced, and the United States lacks new supporting factors in both monetary policy and fiscal policy.

The focus of the recent epidemic is in Europe. The second epidemic began in Spain, Germany, and the United Kingdom. The fatality rate of the epidemic in Europe and its impact on young people are all very great. The reason for the earlier weakness of the US dollar is that the epidemic in the United States is not well controlled, and now it is very likely to turn to the opposite. The possibility of a stronger dollar caused by the epidemic in Europe has greatly increased, which is not good for the copper market in terms of currency pricing and consumption.

Second, the external strength is strong and the internal strength is weak, and the external strength reason is not sufficient.

Since mid-June, the copper market has been strong on the outside and weak on the inside, among which the change of inventory has become the most obvious feature of the market.

The inventory of the previous period + bonded warehouse in China has almost continued to increase since July, and the current inventory has reached 470000 tons, an increase of 160000 tons compared with 309000 tons at the end of June. it is worth noting that the inventory of the previous period lagged behind in August. recently, inventories have also begun to resume the trend of increase. The domestic import window has been closed and the arrival of imported copper has increased, but due to insufficient domestic consumption, China has once again entered the accumulation stage.

From a foreign point of view, LME inventory has fallen to less than 100000 tons, which has not occurred many times since 1980. The decline in inventory supports the rising water in the spot, which has become the main driving force for the fund to increase its copper single holdings. But LME inventories began to change last week, rising by 3350 tons to 78900 tons last week after a long decline, putting pressure on foreign countries for domestic smelters to increase manual exports and little willingness to import at home.

III. Weak domestic consumption and insufficient orders

Foreign copper prices have risen, citing strong Chinese consumption, especially the 5.6% increase in China's industrial output announced last week, the highest this year. Foreign countries are more optimistic about China. But when we are in China, what we see is far more real than foreigners. China's industrial production data are strong, but itemized, the increase is mainly in the production and supply of electricity, gas and water, while manufacturing growth has not continued to expand. And from copper-related industries, production of cars and air conditioners increased by 7.6% and 0.5% respectively in August, down from 26.8% in July. 6%. Investment in fixed assets and floor space completed for housing construction fell by-4.09% and-9.82%, especially when the area completed fell far short of market expectations. Data on investment in power and Electroweb have not yet been released, but based on industry knowledge and full-year plans, a slowdown is inevitable, with domestic copper consumption growth falling to single digits in August, well below double-digit growth in May-July. Therefore, the reason for foreign hype appears to be very fragile.

According to the industry operating rate data, the overall operating rate of copper plate, strip and foil enterprises in August was 69.32%, down 0.14% from the same period last year. The industry is still in the off-season atmosphere, mainly due to the sluggish consumption of electricity downstream, which began in September as the traditional peak season for copper consumption. However, everyone generally has a weak expectation of an improvement in consumption in September. At present, the orders received are limited, and there is no sign of improvement. The operating rate of copper plate, strip and foil enterprises is expected to be 69.42% in September, down from 70.2% last year. Previous data show that the copper tube operation rate in September was much lower than that of last year. Copper pole operating rate fell negative year-on-year in August, and there are few signs of optimism.

(che Hongyun, chief non-ferrous analyst of China Investment Anxin Futures)