Trend analysis

The current global epidemic, the European and American countries have severely upgraded their epidemic prevention measures, and the risks of economic recession have intensified. It is difficult for the current policies of various countries to quickly resolve the market panic about the epidemic. The tide of asset sales is coming. The non-ferrous metal market's resistance to decline has weakened significantly in the past two days, and the systemic risk in the market has increased. Spot copper prices are also inevitable. According to data from SunSirs, spot copper price is 37,586.67 yuan/ton, down 9.2% from the previous day's quotation and down 24.88% year-on-year.

COVID-19 and copper demand

China real estate: Affected by the epidemic, Chinese real estate related data fell sharply from January to February. Among them, the amount of real estate development investment fell 16.3% year-on-year, and the floor space of newly started real estate and sales of commercial housing fell 44.9% and 39.9% year-on-year. The real estate industry during the Spring Festival this year has been under tremendous pressure. The traditional peak season has begun, but the start of construction has not significantly improved, and it is necessary to wait and see the follow-up progress.

China auto industry: The domestic auto industry is also under significant pressure. From January to February, domestic car production fell 45.8% year-on-year, and domestic car sales fell 42% year-on-year. Recently, domestic policies have been introduced to stimulate consumption. On the 18th, the state stated that it would urge municipal vehicles and other vehicles to fully replace new energy vehicles, which may have a boost to the domestic automotive industry.

Overseas demand: In some countries with severe epidemics abroad, the demand for copper accounts for a large proportion. For example, Europe accounts for 18% of global demand, the United States accounts for about 8%, Japan and South Korea account for 4.9% and 3.4% respectively, and strong foreign stimulus measures are also limited.

Copper stocks rise to highest spot since 2016

Affected by the Spring Festival holiday and the epidemic situation, after the holiday, there has been a clear phenomenon of barricades in LME copper and Shanghai copper, and the resumption time of downstream companies has not been determined, and the subsequent Shanghai copper inventory may continue to be high. In the past two months, Shanghai copper stocks have continued to rise sharply, and it has continued to rise to the highest point since 2016, and the downstream demand side has been very weak.

Grim global situation

Recently, the market has experienced a crisis in crude oil prices, and international crude oil prices have been cut off to a record low of more than 10 years (WTI crude oil is $ 26 per barrel). The copper-to-oil ratio hit a historical extreme over the past 20 years (median 42). According to the New Age Futures Research Institute, the great copper-oil ratio 4 years ago was driven by the rapid rise in crude oil after an overfall, and the epidemic crisis was superimposed on crude oil price wars, and the repair of the copper-oil ratio was being achieved by accelerating the fall in copper prices.

Recently, the epidemic in major countries such as the United States and Europe has rapidly expanded. The European Central Bank said that the epidemic may cause Europe to face an economic crisis like 2008. The US stock futures index touched the circuit breaker again and caused panic, which led to a change in global risk assets. The current epidemic has a large impact on market sentiment and the global economy. It is expected that the short-term fundamentals of nonferrous metals may continue to be under pressure.

Copper price is still not optimistic until the inflection point

Based on the above situation, the copper analyst of the Nonferrous Metals Branch from SunSirs believes that copper consumption in core epidemic areas in Europe, America, Japan, and South Korea accounts for about 35%, which is equivalent to domestic consumption, and considering that the effectiveness of epidemic control is weaker than domestic, The negative impact and the impact on the global industrial chain are even more serious. Copper prices are a barometer of the economy. Before the control of overseas epidemic, the global economy will continue to be depressed, the consumer end will be severely suppressed, and copper prices will continue to fall under pressure.

Related listed companies: Jiangxi Copper (600362), Tongling Nonferrous (000630), Yunnan Copper (000878).

If you have any questions, please feel free to contact SunSirs with support@sunsirs.com.