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SunSirs: Increased Supply Tightening Risk and Low Inventory, Chinese Copper Price Rebounds by nearly 40%
July 10 2020 11:25:39SunSirs(Linda)

1. Trend Analysis

The copper price has continued to rebound since it fell back to the lowest point of March 23 this year at 36,560 yuan/ton. As of July 9, it has rebounded by nearly 40 points. The current copper price is 50,620 yuan/ton, up 1.51% from July 8. It increased 3.24% at the beginning of the year and 9.46% year-on-year. On July 9, LME copper opened higher and moved to a high level of 6,332 dollars. After the Asian market closed, it closed at 6,323 dollars, an increase of 1.40%. Shanghai Copper's main contract rose after opening, closing at 50,700 yuan, an increase of 1.81%.

2. Market analysis

Increased supply tightening risk

The recent COVID-19 in Chile broke out. The Chilean Minister of Mines emphasized that the health of miners is better than copper production overnight. The National Association of Mining Workers in Chile said that the cumulative number of diagnoses of workers in large copper mining enterprises exceeded 3,500, and the union called for a shutdown. The Chilean Copper Mine Trade Union is considering seeking a two-week industry-wide shutdown. The chairman of the union union of Antofagasta Mining Company said that seven unions representing about 80% of copper mine workers and contractors in Chile’s copper mines are discussing whether to The government formally requested that all copper mines in Chile be suspended for 14 days. If the decision of the copper mining union to suspend production of all copper mines for 14 days is finally passed, it will affect the output expected to reach more than 200,000 tons, which is still very influential in the market.However, at present, the government is only replacing two shifts of workers, striving to meet the needs of trade unions without affecting the production of copper mines. Moreover, most of the mines in Chile are located in the northern desert, far away from the densely populated center. As far as possible to maintain mine production. China mainly imports copper concentrate from Chile and Peru. At present, the impact of the epidemic in Peru, the largest importer, has been improving, but logistics problems are still outstanding, and other importing places such as Africa are currently not affected.The recent supply risk of Chile's mines is relatively high. The dependence of China's copper concentrates on the external level is around 80%, and 50% of the 80% comes from South America. Supply speculation has pushed the copper market to continue to rise.

Copper stocks shrink

Copper stocks are also shrinking. Chinese copper inventories fell by 70% from the high point of the year and by 19% year-on-year. The favorable mining end stacks up the expectations of purchasing and storage, and the good fundamentals make the copper price approach the high level of the previous year.

Processing company orders are not optimistic

There are more than 40 copper processing enterprises in East China and North China. Most of the feedback orders are not optimistic, and they dare not continue to be bullish on copper prices. Some companies even said that they did not have orders in May, and have rested in June. Only a few copper alloy companies have orders The situation is relatively good. Under the situation that domestic refined copper output continues to increase but does not decrease, demand-side orders cannot be effectively alleviated. Even if the spot copper price rises with the follow-up copper, the holders will significantly discount the shipment, and there will be no market situation for price. extend.

3. Outlook

Based on the above situation, SunSirS non-ferrous metal branch copper analysts believe that the macro-optimistic expectations and the supply-side tightening expectations resonate, and the copper price maintains a strong operating pattern in the short term, but is wary of the risk of Chinese demand in the off-season.
Related listed companies: Jiangxi Copper (600362), Tongling Nonferrous Metal (000630), Yunnan Copper (000878). 

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