The development trend of copper

Consumer off-season approaching Shanghai copper upward momentum weakened.

London copper has broken through the $8,000 / tonne mark, the highest level in nearly seven years, due to shipment disruptions at Las Bambas, the world's ninth-largest mine. Shanghai copper's main contract is close behind, breaking through the $60,000 / tonne mark. From the fundamental point of view, the current copper market presents the state of supply and demand, the end consumption is still good, refined copper supply is significantly higher than last year. 

On the macro front, the US election is over, and the uncertainty has been reduced again, but the outbreak in Hebei needs to be focused on.In summary, with the consumption of off-season is approaching, the possibility of a pullback in Shanghai copper, it is suggested to pay attention to 58,000 yuan/ton of front-line support.

The demand side continues to power.

In November 2020, China's automobile production was 2.783 million units, 12.17% higher than the previous year, 8.10% higher than the same period last year, 252.70 percentage points lower than the same period last year. From January to November 2020, China's accumulative automobile production reached 21.784 million units, down 2.70% year on year, and 6.9 percentage points higher than the same period in 2019. 

In November 2020, China's automobile sales volume was 2.7697 million, 7.63% higher than the previous year, 12.63% higher than the same period last year, 16.20 percentage points higher than the same period last year. From January to November 2020, the accumulative sales volume in China was 22.47 million units, down 2.90% year on year, and up 6.20 percentage points compared with the same period in 2019.

In terms of real estate, from January to November in 2020, the completed housing area was 1508.34 million square meters, up 1.30% year on year, up 1.30 percentage points compared with January to October, and up 1.1 percentage points compared with the same period of the previous year.

In general, the performance of the automobile and real estate markets was higher than expected, boosting the demand for copper market, positive copper price trend.

Output and import volume increased significantly.

In terms of supply, in November 2020, China's refined copper output was 945,000 tons, up 0.70% year on year. From January to November, China's refined copper cumulative output was 9,420,000 tons, up 5.3% year on year.

In terms of imports, in November 2020, China imported 351,000 tons of refined copper, and from January to November, China imported 4.3478 million tons of refined copper, higher than 3.192,000 tons in the same period of the previous year. The surge in imports of refined copper is partly due to China's steady economic recovery and partly due to the continued strength of the renminbi. In 2020, the RMB exchange rate continued to appreciate, from 6.8 to around 6.4 at present, giving copper imports an advantage.

Inventory, as of January 8, the previous period of copper stocks of 27,643 tons. According to the seasonal chart, inventory levels are low, but January-March is the inventory accumulation period, because related enterprises are on holiday for the Chinese New Year, and inventory is expected to start to build up.

Following the situation of the outbreak in Hebei.

On the international macro front, the US election concluded and the US Congress confirmed Joe Biden as the new US president, further reducing the uncertainty and boosting the market sentiment. In addition, because the U.S. economy is still affected by the epidemic, daily new confirmed cases of the number is still large, to reverse its economy, the U.S. government has launched a number of economic stimulus bill added liquidity to the market, after biden took office, is expected to continue to roll out stimulus, will continue to maintain sufficient liquidity in the market, this will make the dollar index is low, good copper price.

Domestically, in December 2020, China's manufacturing PMI was 51.9, above the line between expansion and contraction, with a month-on-month decline of 0.20. In the same period of 2019, the manufacturing PMI was 50.2. The PMI for new orders in China was 53.6, above the line between expansion and contraction, down 0.30 from the previous month. 

In the same period of 2019, the PMI for new orders was 51.2.It is worth noting that China's hebei province outbreak, repeatedly confirmed cases and asymptomatic infections are on the rise, shijiazhuang city subway and bus service, local enterprises have to start thinking about the holiday, although local copper related enterprises in hebei province is not much, but the evolution of the epidemic is noteworthy, if the outbreak situation deteriorated, will cause adverse effect to the copper.

In summary, the traditional consumption off season is coming, Shanghai copper upward momentum will gradually weaken, it is recommended to operate cautiously, while paying attention to the inventory accumulation and Hebei epidem situation.