A week's review of copper industry: the global copper market will have a surplus of 328,000 tons

Source: Capway    Time: 24 March 2023

I. CapwayFutures: Geometry of the impact of dual control of energy consumption on copper market

In late September, the copper market was still in the anxious state of "weak supply and demand", and the copper price showed a momentum of shock and decline. However, the author believes that the current copper market may face a new round of internal and external double impacts. The path of the Federal Reserve's interest rate hike is gradually clear, and the latest bitmap of the Federal Reserve shows that the Federal Reserve's interest rate hike may advance to 2022. Under the low liquidity tide, the global copper investment demand and consumption demand will fall back; the dual control of domestic energy consumption has a drag on the copper processing industry, but it has little impact on copper smelting. In addition, with the high price of raw materials, the situation that restricts consumption in turn has not been reversed.

Will there be a macro-and micro-resonance decline in the copper market in the future? The author believes that low inventory may give copper prices a certain amount of drop defensive protection, but the pattern of "weak supply and demand" may change as consumption falls back to a certain threshold, and the copper market will be tired. Wait for the copper market to enter the tired stage, the copper price resonance decline will start.

Tight liquidity brings cooling in investment demand

At the US Federal Reserve's interest rate meeting in September, the Federal Reserve continued to maintain the benchmark interest rate at 0-0.25%, and reiterated that it would maintain the interest rate at the current level until achieving its dual goals of maximum employment and price stability. The council unanimously voted to maintain the interest rate paid by the reserve balance at 0.15%, effective from September 23, 2021. The basic credit interest rate remains unchanged at 0.25 percent, and continues to remain unchanged, in line with market expectations.

II. Copper prices rose first and then suppressed in the fourth quarter

At present, the copper stocks in domestic exchanges and bonded areas are far lower than the level of the same period in previous years. If imported copper cannot effectively make up for the gap in domestic refined copper production, the domestic supply will be tight in the fourth quarter.

Copper prices maintained an oscillating trend in the third quarter. Lun copper continued to operate in the range of 9,000-9700 USD/ton, while Shanghai copper oscillated in the range of 66,000-72000 RMB/ton. Technically, the trend of Shanghai copper was stronger than that of Lun copper. In the third quarter, the macro and fundamental aspects are basically consistent with the market cognition, and the copper price is waiting for direction selection.

Waiting for the Federal Reserve to shrink its debts

The core theme of the macro market in the third quarter is expected revision. The market's anxiety about the turn of European and American monetary policies has obviously eased, and with the announcement of the minutes of the monthly European and American monetary policy meeting, the market no longer equates the narrowing and interest rate increase, at the same time, the impact of the global epidemic on the economy and the market continues to fade, and the impact of the macro market on the copper price shows signs of weakening.

III. ICSG: The global copper market will have a surplus of 328,000 tons in 2022

On October 7, the International Copper research organization (ICSG) said on Thursday that the global copper market is expected to have a gap of 42,000 tons this year and a surplus of 328,000 tons in 2022.

ICSG said in a press release: "As the output of some countries, especially Peru, continues to return to the pre-epidemic level, the output in 2022 is expected to increase by 3.9 percent."

"The increase of mines and expansion projects that have been put into operation recently and the planned launch of some large-scale projects will also provide support for copper surplus."

ICSG said that after a 2% increase in 2020, global refined copper production is expected to increase by about 1.7 percent in 2021 and 3.9 percent in 2022.

IV. Chile's copper export revenue increased in September due to the rise in copper prices

Foreign media news on October 7: Chile's central bank said on Thursday (October 8) that Chile's copper export revenue reached US $4.157 billion in September, up 18.5% year on year, boosted by the rise in global copper prices.

In September, Chile's total export revenue was 7.429 billion US dollars, up 24.4% year-on-year, with a trade surplus of 79 million US dollars.

In May this year, copper prices hit a record high as the global economy recovered from the epidemic. However, the copper price has dropped since then, and the latest copper price has dropped by about 14 percent age points compared with the historical high, because of worries that China's economic growth has slowed down and demand has weakened.

In Chile, workers in mines operated in Codelco and Caserones of JX Japanese mining went on strike, resulting in lower production. However, the strike ended in early September. The strong growth of copper exports in September marked the recovery of Chile's copper industry.

V. Cochilco: Chile's copper output declined in August

Foreign media news on October 7: Chile's National Copper Industry Committee said on Cochilco that the output of Chile's large copper mines declined in August, partly due to a copper strike under Codelco.

The committee said that Chile's copper output in August was 461900 tons, down 4.6 percent year-on-year.

Among them, the world's largest copper mine Codelco produced 144,500 tons of copper in August, down 6.7 percent year-on-year, because its Andy na copper mine had a long-term strike.

The copper output of eskondida copper mine under BHP Billiton was 81,500 tons in August, down 14% year-on-year.

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