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Wenzhou Qinhua Refrigeration Equipment Co., Ltd.
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06

2023

-

04

Copper prices may rise to a range of 70000-73000 yuan/ton without changing the inventory structure

1. Macro. On the overseas side, the "sequelae" of the Federal Reserve's continuous and rapid interest rate hikes have begun to emerge, and small and medium-sized banks in Europe and America have successively experienced run risks. Although the event has eased with the rapid provision of liquidity and continuous mediation by central banks and governments, the potential "black swan" risk cannot be effectively ruled out. In addition, under the control of inflation and potential financial risks, the Federal Reserve's policy has fallen into a dilemma, and the market is betting on the Fed's policy shift, Risk appetite has also rapidly rebounded, leading to a weakening of the US dollar index. However, from the perspective of high interest rate environments and potential financial risks, overseas economic or demand prospects cannot become a factor supporting the rise of bulk commodities; On the domestic side, economic recovery is still ongoing, and the market recovery is relatively slow. In addition, during the traditional peak season in China, policy support has begun to slow down, and demand may always face a lukewarm and lukewarm situation under the combination of "stable growth" and "structural adjustment".
2. Fundamentals. In terms of copper concentrate, the domestic TC quotation remains relatively high, indicating that the actual situation of domestic copper concentrate is still relatively loose. However, the increase in production capacity in the smelting process may affect the expected supply and demand of copper concentrate. In terms of refined copper, in the first quarter, the cumulative apparent consumption of domestic copper increased by 3.35% year-on-year to 3.4016 million tons, while the cumulative actual consumption increased by 1.75% year-on-year to 3.1714 million tons. From the operating rate of copper downstream processing enterprises in the first quarter, it can be seen that demand is showing a slow recovery, but it can also be inferred that the direction of infrastructure and new energy is better than the demand for real estate. In terms of inventory, as of March 31, global copper explicit inventory increased by 181000 tons to 454000 tons compared to the end of last year, with a peak of 580000 tons. LME inventory decreased by 24200 tons to 6475200 tons; Compared to the end of last year, the social inventory of domestic refined copper increased by 104000 tons to 201900 tons, with a cumulative high point of 329900 tons. The social inventory of domestic bonded areas increased by 117900 tons to 172600 tons, with a cumulative high point of 20600 tons. The rapid inventory removal after domestic accumulation provides good support for prices.
3. Viewpoint. At the beginning of the second quarter, copper faced a good situation in both macro and fundamental aspects. Firstly, the easing of banking events in Europe and America led to an increase in risk appetite; Secondly, the domestic fundamentals have performed well in terms of data, especially with a rapid recovery in demand in March; Thirdly, the pattern of internal and external destocking remains unchanged, especially as domestic destocking is faster than in previous years, leading to expectations of a surge in copper prices. But there are also no hidden dangers. Firstly, in the macro environment of internal stability and external concerns, there is significant uncertainty in the demand outlook itself, especially with the decline in overseas demand prospects, and domestic exports are also facing pressure; Secondly, the current demand for domestic infrastructure (biased towards the power grid) is good. Orders were successively placed in the fourth quarter of last year, which also drove a round of replenishment in the downstream and promoted rapid domestic inventory removal. However, this part of orders will have obvious seasonality. In addition, copper in real estate still performs weakly, and the conversion of refined copper inventory into finished product inventory leads to structural contradictions in inventory. Overall, copper prices may rise to the range of 70000-73000 yuan/ton at the beginning of the second quarter, but potential risks and weak demand may make it difficult for copper prices to stabilize and eventually decline. However, the timing of the decline is difficult to determine. I believe it may be in mid to late April (strong expected high point) or mid to late May (traditional peak season high point), and pay attention to the pace of operation.

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