original title:Shanghai Copper There is suppression under the support
From the beginning of November to the present, copper prices have fluctuated as a whole, among which the center of gravity of the London copper oscillation is 9650 US dollars/ton, and the center of the Shanghai copper index is 70,000 yuan/ton. Copper has commodity attributes and financial attributes. Under the premise that the two attributes do not resonate, the price of copper maintains oscillation. We believe that the US dollar will continue to strengthen in the later period and the real estate market will continue to adjust, which will limit the space above the copper price. However, the low fundamentals of inventory may continue, which will form the bottom support for prices.
The U.S. dollar continues to strengthen and other restrictions on the upper space
Expectations for interest rate hikes in the United States continue to increase, and the US dollar index continues to rise. The U.S. October CPI surged 6.2% year-on-year, the highest level since December 1990. U.S. inflation pushed up the growth of retail sales. In October, retail sales showed a growth trend for the third consecutive month, the largest increase since March this year. The strong performance of inflation and retail sales in the United States has strengthened the Fed’s interest rate hike expectations. The market expects that the Fed’s interest rate hikes will hit a new high next year, and the U.S. dollar index will continue to rise. With the gradual approach of Christmas in the United States, inflation is likely to rise again, and the Fed’s interest rate hike expectations may be strengthened again.
China’s real estate is at an inflection point, and the overall situation is weak. According to data from the National Bureau of Statistics, the sales price of commercial residential buildings in 70 large and medium-sized cities continued to decline slightly from the previous month, and the year-on-year increase continued to fall. At the same time, China’s real estate development prosperity index has shown a downward trend since March. In order to prevent a cliff-like fall in the real estate market, the domestic bond issuance policy of real estate companies has been loosened, and many real estate companies have intensively issued medium-term notes and ultra-short financing bonds. According to market judgments, the overall real estate market is down, but there will be no risk of stalling. The weakening of real estate will affect the terminal consumption and financing demand of copper, thereby limiting the upper space of copper prices.
Downstream operating rate rebounded to form bottom support
The terminal industry replenishes the warehouse, and the start of copper materials has picked up. The epidemic in Jiangxi has disrupted the transportation of recycled copper, and the supply of recycled copper has tightened. In mid-November, the European Union will revise the solid waste transportation regulations, companies will suspend procurement from the European Union and some suppliers have also stopped executing orders, strengthening the expectation of a tight supply of recycled copper. The tight supply of recycled copper restricts the production of recycled copper rods, which is conducive to the demand for refined copper rods. At the same time, orders for wires and cables in the downstream photovoltaic, wind energy and other new energy fields have increased significantly, driving the weekly operating rate of refined copper rods to increase month-on-month, and the replenishment of refined copper rod companies has increased. The main engine factory entered the warehouse preparation stage at the end of the year, and the amount of copper pipe purchased increased significantly, driving copper pipe enterprises to increase production and increase raw material inventory. Companies such as electrical and electronic connectors and transformers increased their copper strip inventory, and the operating rate of copper strips rose steadily.
The tight supply of copper concentrate is superimposed on power curtailment in some areas, and domestic refined copper production is under pressure. The spot TC of copper concentrate oscillated, and smelting profits hovered around 2,200 yuan/ton. Protesters in the Peruvian community once again blocked the key mining corridor used by the Las Bambas copper mine. Due to the shortage of containers in African ports, a large number of copper concentrates are stranded in local ports, and the supply of copper concentrates is expected to increase. At the same time, the growth rate of capital expenditure of overseas large mines is still in a low growth cycle, and the supply of long-term copper ore is still limited, which will affect the long-term TC of copper concentrate next year.
In general, the strong US dollar combined with the weakening of real estate limits the room for copper prices to rise. However, the fundamentals are still good, the copper social inventory continues to be low, and the spot premium is high, which will form the bottom support for copper prices. We believe that in the future, the copper market will continue to lack resonance drive, and it will be difficult to have a directional choice in the operation of copper prices, and the overall oscillation will be dominated. It is recommended that investors operate in a range and look for a margin of safety to sell high and buy low.(Author’s unit: Guotai Junan Futures)
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