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SunSirs: Demand Recovered, Supply Was Disturbed, and Copper Prices Are Easy to Rise But Difficult to Fall in February
January 31 2023 09:45:25SunSirs(John)

Price trend

According to the monitoring data of SunSirs, the copper price rose slightly in January, from 66,145 RMB/ton at the beginning of the month to 69,710 RMB/ton at the end of the month, with an overall increase of 5.39% and a year-on-year decrease of 1.14%.

Analysis review

According to the current chart of SunSirs, the spot price of copper was higher than the futures price in the first ten days of January, and the main contract was the expected price in two months. Due to the Spring Festival holiday, the spot and futures prices in late January did not change. Near the end of the month, the main basis became smaller, which was good for buying hedging.

According to the LME inventory, the LME copper inventory rose in January, but remained at a low level as a whole. The accumulation of stocks in the off-season is a normal seasonal phenomenon.

Macroscopic aspect: the current weak operation of the US dollar index provides opportunities for copper prices to rise. In December of last year, the US CPI fell month-on-month and the year-on-year increase narrowed. The market bet on the sum of the Federal Reserve's interest rate hikes in February and March of this year was less than 50 basis points. The US dollar index continued to weaken under the rising risk appetite. In addition, the investor confidence index of the euro zone rose in January, and the market expected that the economic recession in the euro zone would be relatively mild.

In terms of supply: the recent domestic refined copper supply was less than expected, and there had been a lot of interference from overseas copper concentrates recently. The situation in Peru is volatile, and protests broke out, which interfered with copper production activities; The copper output of Antofagasta copper mine in Chile decreased by 10% in 2022; First Quantum announced a 5% decline in copper production in the whole year, and the Panamanian government ordered to suspend its operation of Panama copper mine in the country; Paranapanema, the only smelter in Brazil, filed for bankruptcy; The production of Onsan Smelter in South Korea was abnormal; Trafigura Group will withdraw a large amount of copper from LME registered warehouses.

In terms of demand: as the speed of domestic deregulation is faster than expected, production and consumption will have a rapid and seasonal rebound after the Spring Festival. After the holiday, with production gradually returning to the right track and market confidence restored, copper consumption may have a better performance.

Market outlook

In view of the above, the domestic epidemic has rapidly peaked, and the market has a strong expectation of demand recovery. It is expected that there will be a wave of over-seasonal recovery in consumption after the Spring Festival. Although domestic consumption is relatively weak at present, it is a normal seasonal phenomenon to accumulate stocks in the off-season. The overseas supply side is sluggish, the mining side and smelting side are disturbed, and the market is very worried about supply when the LME write-off warehouse receipts are rising. On the whole, the short-term copper price is in a state of easy to rise but difficult to fall, and it is expected that the copper price will fluctuate to be slightly stronger in February.

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