Copper price wide - run - based in consumer off-season

Since May, the rising copper price has inhibited downstream terminal consumption, and the rising raw material price has also attracted the attention of domestic senior officials. Since then, the copper price has continued to adjust from the high of 78,000 yuan/ton.Looking ahead, the market's expectations of Fed monetary policy tightening are rising, while the phased stabilization of the US dollar index is weighing on the commodity market.Industry, domestic downstream consumption into the traditional off-season, consumption will further weaken or bring further negative copper prices.The author believes that June - July copper prices no greater rebound kinetic energy, maintain wide shock probability.

Fed monetary policy tightening is expected to be strong

The US economy is showing further signs of recovery.The ISM manufacturing index rose to 61.2 in May from 60.7 in April, above market expectations of 60.9, marking the 12th consecutive month in expansionary territory.The latest non-farm payrolls data for May increased by 559,000, less than expected by 675,000, but the unemployment rate fell to 5.8%, a further drop of 0.3 percentage points month-on-month, and the lowest since March 2020.The job market is expected to continue to improve as vaccination rates rise.

According to the latest Centers for Disease Control and Prevention report, 63.3 percent of U.S. adults have received at least one shot of the COVID-19 vaccine. Biden's previous goal was to have at least 70 percent of U.S. adults vaccinated by Independence Day on July 4.Strong jobs and manufacturing data have fueled growing expectations that the U.S. central bank will tighten monetary policy, with Fed Governor Kaplan recently reiterating that the central bank should taper "sooner rather than later" and "tighten policy modestly."It is expected that once the Fed continues to release tightening signals, commodity market risk appetite will decline, copper price rally momentum will weaken.At the same time, as the US economy continues to improve and the potential policy shift is expected, the probability of a subsequent rebound in the USD index increases, which will further weigh on copper prices.

Lower willingness to replenish the downstream database

Mine supply is expected to tighten.In an update, the union at BHP Billiton's Escondida mine said it had submitted a preliminary proposal for a new collective Labour contract, marking the start of collective talks at the world's largest copper mine.In the near future, further attention needs to be paid to the progress of the negotiations. Under the current background of tight mine supply, the upstream strike is easy to cause market speculation.Production at BHP Billiton's Escondida mine fell 16.5 per cent year on year to 85,700 tonnes in April and is down 14.5 per cent year-to-date.

There are signs of cooling in end demand.Data showed that the utilization rate of wire and cable enterprises was 81.7% in May, down 1.86% month-on-month.In May, the utilization rate of copper strip foil enterprises was 84.15%, down 1.44% month-on-month.In May, the utilization rate of copper pipe enterprises was 85.45%, down 3.96% month-on-month.The operating rate of copper rod enterprises in May was 70.45%, down 0.14% month-on-month.Meanwhile, weaker-than-expected import data further corroborated the demand side, with China's imports of unwrought copper and copper materials falling for the second month in a row to 445,000 tons in May, down 8%, as rising copper prices crimped end demand.After entering June, the traditional off-season effect gradually appeared, the industrial end of the price with a drop in the boost.

Signs of long position reduction are obvious

From the perspective of domestic position, since May 12, when the official clearly proposed to deploy the work of ensuring and stabilizing the price of bulk commodities, the copper price began to fall from the high level, and the total position of copper dropped from 700,000 to 650,000, indicating that the long funds reduced positions and stopped profits, and the copper price correction temporarily did not see the locked cost of industrial capital admission.At the same time, CFTC net long non-commercial positions stood at 18,523 as of June 1, down 35,247 from 53,770 at the beginning of May, indicating a clear reduction in speculative long positions in the copper market.

To sum up, the short - term copper market in the absence of further stimulus, prices lack of further rebound momentum.With the Fed tightening expectations increased, the probability of a periodic rebound in the dollar increased.In addition, domestic downstream consumption has entered the traditional off-season, and the real demand has no big bright spot. It is expected that the copper price will oscillate between 67,000 and 75,000 yuan/ton in a wide range in June and July.In terms of operation, it is recommended that downstream enterprises purchase mainly according to demand, and buy a small amount to lock in the cost when the price is adjusted back to 68,000-70,000 yuan/ton.