Multiple positive factors promote Shanghai copper to maintain high consolidation

    Driven by multiple positive factors, Shanghai copper main contract price in recent days a strong breakthrough of 53,000 yuan/ton line.On the one hand, confidence has been boosted by a sustained economic recovery and risk appetite has been boosted by optimistic expectations of another round of STIMULUS measures in the United States.On the other hand, the overseas epidemic has frequently disrupted the copper supply end, and the annual decline in copper production is almost a foregone conclusion, which has also provided speculation topics for the market.

Port stocks continue to fall

    As the epidemic continues in South America, Chile's mining minister expects copper output to fall by 200,000 tons this year, equivalent to 3.5% of output in 2019.The CSPT team recently set the floor price of TC/RC for the third quarter at $53 / ton and 5.3 cents/lb, which is a significant decrease from $67 / ton in the first quarter, partly reflecting the tightening trend of imported copper concentrate supply.Copper concentrate port stocks have been falling for more than a month as the impact of supply chain disruptions in copper-producing countries has been transmitted to China.In addition, since July 1, China began to implement the new standard of reclaimed copper and reclaimed brass, waste copper as a general raw material products imported into China.Copper ingots, brass ingots, brass bars and other rough copper products produced in Southeast Asia will gradually enter the Chinese market, when the supply and demand of copper scrap will appear a new balance.In general, considering the shipping date, domestic copper raw material supply will remain relatively tight in July.

Smelter production was disrupted

    SMM expects China's refined copper output in June to be 759,200 tons, up 4.25% year on year and down 1.42% month on month.The refined copper output in June was higher than the forecast in May, mainly due to the delay of the refinery maintenance schedule, which resulted in the lower impact of the maintenance in June than the expected value, and the improvement of domestic crude copper supply also boosted the refinery output of this raw material.Due to the heavy maintenance of refineries in July, domestic refined copper output is expected to be 738,000 tons in July, down 2.79% month on month and 2.28% year on year.At present, the capacity of Chinese smelters is expanding, but the problems of raw materials and sulfuric acid restrict the recovery of capacity utilization rate of copper smelters.On the one hand, the willingness of spot purchase of most smelters is insufficient, mainly due to spot TC hovering at the low to medium level of 50, below the break-even line of most smelters, more smelters control the feeding, the raw material reserve of smelters maintains a tight balance state.On the other hand, some areas of sulfuric acid is again unmarketable, which is also a disruption to smelter production.

Grid investment will accelerate slightly

    Since April, China Southern Power Grid and The State Grid have all resumed production.From January to May, the cumulative value of investment in power grid capital construction was 113.4 billion yuan, down 2% year on year. Compared with the 43.4% decrease in January and February, which was the worst hit, the investment has recovered significantly.The scale of grid investment this year will not show the negative growth trend of last year, and the worst-case scenario will be the same as last year.If the annual flat target is to be achieved, grid investment will accelerate slightly in the second half of the year, and copper rod consumption may continue to benefit.

The auto industry continues to recover

    After bottoming out in February and March, the auto industry has picked up momentum. In May and June, both production and sales of the auto industry continued to improve.In June, automobile production and sales reached 2.325 million and 2.03 million units respectively, up 6.3 percent and 4.8 percent month-on-month, and up 22.5 percent and 11.6 percent year-on-year, respectively.On the one hand, the resumption of economic production unleashed the pent-up demand for cars during the epidemic;On the other hand, manufacturers and other regions have introduced a series of preferential policies to stimulate automobile consumption, and the driving force of automobile enterprises to achieve the half-year sales target has been strengthened.At present, auto demand may be at the beginning of a long period of recovery, and the subsequent recovery needs to pay attention to the game between the release of demand driven by policy stimulus and the decline of residents' income expectations.

    To sum up, the disturbance factors on the supply side have provided some support for copper price. However, domestic consumption in the lower reaches of copper rebounded obviously in the second quarter, and it is expected that the strength of consumption recovery will slow in the second half of the year, and copper price will get weaker support from the consumer side.Copper consumption this year is expected to be lower than last year, dragged down by a sharp first-quarter decline.In general, after the early rebound, positive factors have been realized. It is expected that the main contract of Shanghai copper in the second half of July will be dominated by the high oscillation market, with the upper pressure level of 54,500 yuan/ton and the lower support level of 49,600 yuan/ton.