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Low inventories support copper prices, but not prices

Views: 2     Author: Site Editor     Publish Time: 2021-01-04      Origin: Site

Copper prices started to rally sharply in mid-November, buoyed by optimistic expectations of a global economic recovery amid ample liquidity and supported by low inventories. As copper prices rise faster, recently into a high adjustment. Looking ahead to the future, the overall macro environment is warmer, the effectiveness of the vaccine is gradually verified, the external loose environment continues, and the global economic growth prospects are optimistic.


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In the short term, the trend of tight supply at the mine end may continue, while in the medium term, next year will be a big year of copper production expansion, and the capacity dragged down by the epidemic will be released, and the tight supply is likely to improve. In general, the domestic refined copper output continues to grow, while the inventory is at a low level, the copper price is easy to rise and difficult to fall, coupled with a slight recovery in demand, automobiles, air conditioning consumption continues to improve, the copper price may continue to rise after adjustment.

 

Macroscopical atmosphere slants warm.

 

The vaccine is gradually proving effective and is expected to be widely available by the first quarter of next year. At its December meeting, the European Central Bank (ECB) kept the benchmark interest rate unchanged and increased the size of its emergency debt purchase program (PEPP) by 500 billion euros, extending the term by nine months to the end of March 2022. The US election is over and the two parties are negotiating an estimated $900bn fiscal stimulus package. The fragility of the economymakes it harder, or slower, to exit from easing in 2021. In addition, the effect of the early release of liquidity will be further reflected, inflation expectations will rise.

 

China's manufacturing PMI rose 0.7 percentage points month-on-month to 52.1% in November, indicating that the recovery growth of the manufacturing sector accelerated. The index of new orders rose 1.1 percentage points, while raw material inventories rebounded 0.6 percentage points to 48.6 percent. After the outbreak of the epidemic, the index of new orders rose rapidly, the raw material inventory also moved up slowly, and the confidence of enterprises gradually recovered. However, under the background of a low base in the early stage, there is a certain space for future increment.

 

Short-term copper supply is tight.

 

With the outbreak of COVID-19 overseas, the normal production and expansion of copper mine were blocked, and the supply of mine end continued to be tight.Since April, the smelter processing fee TC fell rapidly, and basically stabilized below $50 / ton after August. Chile's copper production totaled 486,400 tons in October, down 0.73 percent from a year earlier, the Chilean Copper Commission said.

 

Peru's copper output rose 1.4 percent to 207,000 tons in October from a year earlier.In October, China imported 1.6904 million tons of copper ore and concentrate, and imported 18.0498 million tons in the first 10 months, up 0.8% year-on-year. On December 14, China Copper, Tongling, Jiangcopper, Jinchuan and Freeport confirmed that the TC long order price for 2021 will be US $59.50 / ton, a reduction of US $2.50 / ton from US $62 / ton in 2019. In the medium term, the tight supply at the end of the mine will ease.


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Mines in Peru, Canada and Brazil are expected to produce 280,000 tons of copper concentrate in 2021 after recovering from epidemics or other disturbances, and new and expanded projects will add more than 1 million tons in 2021.

 

Inventories are at absolute lows.The data showed that China's electrolytic copper output in November was 831,700 tons, up 1.23% from the previous month and 4.11% from the previous year.

 

The new domestic production capacity was put into operation in November, and combined with the high production schedule of refineries at the end of the year, the monthly output showed a significant increase from the previous month. After the fourth quarter, the economy recovered strongly, the demand improved quarter-on-quarter, and with the price rise, the market confidence recovered, downstream began to actively prepare goods, the inventory decline is large.

 

As of December 11, stocks fell to 82,100 tonnes, the lowest level in recent years. The pace of decline in LME copper inventories has also accelerated since mid-October, falling to 144,800 tonnes as of December 14. Overall inventories are low and copper prices are easy to rise and hard to fall.


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