[institutional Review] Shanghai Copper Oscillation strengthened in the third quarter

SMM News: according to Futures Daily, the current round of copper price strength began in late March. The shortage of supply caused by the spread of overseas new crown pneumonia is mainly reflected in the shortage of copper concentrate, while domestic work resumes production in the same period, terminal demand resumes one after another, and the two-way driving force of supply and demand brings upward driving force for copper prices.

The stimulus policy is effective.

In the first and early second quarters, the global economy was relatively hard hit by the epidemic; since May, in the context of global liquidity easing, a number of countries have gradually resumed work and production. At present, the overall economy is slowly improving: the initial PMI of Markit manufacturing in the United States in June was 49.6, higher than the expected value of 48. The euro zone's manufacturing PMI in June was 46.9, higher than expected. Among them, the initial value of manufacturing PMI in Germany in June was 44.6 and that in France was 52.1 in June, both of which were higher than expected. Although most of the manufacturing PMI in Europe and the United States was still below the rise and fall line in June, it was better than expected as a whole, and significantly rebounded from the previous value, and the peak of economic impact brought by this round of epidemic has passed.

With the normal thinking of global epidemic prevention and control, as well as the economic stimulus policies issued by various countries, the third quarter is expected to usher in the effective period of economic data for the resumption of work and production, and the macro level may turn warmer in stages.

Supply is expected to be tight

In May, the Peruvian mining industry gradually began to operate, and mining volumes in Mexico, Ecuador, Bolivia and parts of Canada picked up slowly, but the processing fees for imported copper concentrates continued to decline. The processing fee for imported copper concentrate reported by SMM for the week of June 19 was US $51.49 per tonne, down more than 25 per cent from US $68.88 per tonne at the end of March.

This is mainly related to the epidemic in South America is not optimistic. Relevant statistics show that as of 09:55 on June 26th, a total of 259000 cases of new crown pneumonia had been confirmed in Chile and 268600 cases had been confirmed in Peru, ranking 7th and 6th respectively in the world. Epidemic experts warned to be psychologically prepared for a "second outbreak" of the epidemic. As a result, the market expects copper concentrate supply to decrease in the third quarter.

At the same time, due to the impact of the epidemic, the replacement frequency of electrical appliances and cars in Europe and the United States has slowed down, the export of scrap copper has decreased accordingly, and the domestic supply of scrap copper will also decline.

There is no new bright spot in demand.

According to SMM research data, the operating rate of cable enterprises was 101.74% in May, an increase of 1.30% from the previous month and 9.68% from the same period last year. Generally speaking, the high operating rate of the cable industry mainly depends on the promotion of electric power and engineering projects. However, at present, the cable increment has basically made up for the reduction of work stoppage due to the epidemic in February and March, and enterprises are more cautious about consumption in the second half of the year.

Commercial housing sales picked up obviously, not only continued to make up for the stall this year, but also turned to a cumulative year-on-year growth of 9.66% in May. Judging from the overall pattern of the real estate industry in recent years, although housing sales will usher in a phased sales peak in September, the transmission to the front-end construction link is relatively limited, mainly because the area completed in the current period makes up for the increment of housing sales to a considerable extent. This year, the area for sale of housing continues to be stable, with no obvious fluctuations. We believe that the overall property market in the third quarter is stable, and the sales link may be strong, but the actual boost to the demand for copper is relatively small.

Judging from other demand links, the inventory of the air conditioning industry is as high as 14.863 million units, and overseas demand has not yet recovered; according to the situation in previous years, automobile sales will continue to grow in the second half of the year, and there is still room for various domestic policies to promote automobile consumption to stimulate domestic demand, and automobile production is expected to continue the current mode of fixed production by sales.

In short, the third quarter may usher in this round of economic stimulus policy effective period, copper prices have room for further strengthening.

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