Market sentiment continues to improve Shanghai copper is lonely

        Since the end of March, copper prices continue to rise, Shanghai copper index reached 47560 yuan/ton, is the highest level after the Spring Festival, LME copper rebounded to the highest $5928 / ton.In the afternoon, under the policy support, the macro environment is optimistic, copper market bullish sentiment accumulated, but the risk of a second outbreak of the epidemic is also increasing.Domestic inventories are low, but spreads on refined copper scrap have widened, spot premium has narrowed rapidly and support on the supply side has weakened.Cable demand is still relatively high, but the continuity is slightly insufficient, the air conditioning industry and the automobile industry recovery, providing part of the increase.On the whole, with copper prices reaching post-2011 highs and facing increasing pressure, there is the possibility of a short-term correction, but there is no obvious downside and the correction may be limited.

 Sentiment continues to improve

         The overall macro environment is optimistic, countries restart their economies, risk appetite continues to rise, the NASDAQ index hit a new high, the price of crude oil also gradually rose to about $40 / b.Policy remains loose, with the Fed leaving interest rates unchanged and not expected to raise rates until the end of 2022.In May, M2 growth remained high, M1 growth picked up, and social finance data and credit scale continued to expand.The main risk now is that the risk of a second wave increases as states reopen and the number of new confirmed cases increases.In terms of copper market sentiment, speculative holdings of copper in COMEX1 turned to net long positions in the week of June 9, with long positions increasing for the second consecutive week, while short positions continued to fall sharply, and bullish sentiment accumulated. 

Short-term supply remains tight

        In the first four months of this year, copper production in Chile was less affected by the outbreak. Codelco's output in April increased 2.8% year on year to 133,000 tons, with cumulative output rising 3.8% in January-April.BHP's Escondida copper mine rose 11.4 per cent from a year earlier to 102,600 tonnes.China's imports of copper ore and refined copper in April were 2.029,500 tons, up 14.1% month-on-month and 22.87% year on year.Since mid-May, the outbreak in Chile and Peru, the major producers of copper mines, has escalated. Currently, the number of confirmed cases is around 6,000. We are concerned about the impact on copper production.Smelter charges were $51.50 / ton last week, down $1 / ton from The previous month.SMM expects June copper output to fall to 734,200 tonnes, down 4.66 per cent month-on-month.

Spot premium quickly narrowed

      Domestic cathode-copper inventories have continued to decline, falling to 128,100 tons as of June 12, the lowest level in nearly four years, while futures inventories have slowed to around 42,600 tons.Inventories of copper in Shanghai's bonded area rose by 32, 200 tonnes last week from the previous month to 216,200 tonnes, the third consecutive weekly increase, according to SMM.LME copper stocks fell 9,200 tonnes to 234,500 tonnes last week, leaving current levels moderate.

      With the continuous rise of the copper price, the scrap copper that had been held in the previous stage flowed into the market in large quantities, and the imported scrap copper superimposed on South Korea, Southeast Asia and other regions increased the arrival of the copper, so the scrap copper supply improved significantly, and the fine scrap price gap returned to around 1,500 yuan/ton. The substitution effect of the copper scrap appeared, which was not conducive to the consumption of fine copper.The increase in short-term supply has led to a rapid narrowing of spot premium, which fell to near level last week.

Demand neutral slight preference

      With the completion of the previous backlog of orders, new orders in the cable industry weakened significantly after mid-May, the copper rod cable industry gradually entered the off-season in June, and the replacement of scrap copper increased. It is expected that June starts will decline, but compared with the same period last year, the situation is still favorable.According to SMM research, the operation rate of copper pipe enterprises was 83.39% in May, down 7.54 percentage points year on year and 1.03 percentage points month on month.Although the copper pipe enterprise starts to weaken somewhat in May, but June is the peak season of air conditioning production, and there is the demand for promotion in the middle of the year, domestic demand continues to improve, the copper pipe enterprise operating rate is expected to pick up in June.The auto market is also picking up, with 2.187 million and 2.194 million vehicles produced and sold in May, up 18.2% and 14.5% year on year, respectively.