price drop storm is coming! Copper, thread, and iron ore plummeted across the board!
As of August 16, China's electrolytic copper social inventory was 159,500 tons. The inventory was at a relatively low level during the same period in history. In the off-season cycle, low inventory provided a certain bottom support for copper prices, which were around 70,000 yuan/ton. Wide oscillation. Judging from the current supply and demand link, there is room for copper inventories to rebound, but the rebound trend in inventories is relatively moderate, which will limit the subsequent rise in copper prices.
Figure 1: China’s electrolytic copper social inventory
Data source: Mysteel
Specifically:
. The country has entered the peak period of maintenance, superimposed on the impact of power restrictions in the south, and domestic output has declined
According to mysteel research, domestic smelters were at a There were many overhauls, and domestic output dropped significantly. In addition to the impact of some routine maintenance, the southern region is once again facing the impact of power cuts. Smelting companies in Guangxi have been affected by power cuts and have advanced their original maintenance plans. The number of company shipments has dropped sharply, which has even caused a regional supply shortage in the south. As of the date of publication, there is still no clear plan to lift power restrictions, and domestic refined copper output is still on a downward trend in the short term.
Table 1: Maintenance statistics of Chinese smelting enterprises in 2021
Data source: Mysteel
. The import profit window is open, and imported copper continues to flow into
In the first half of the year, the domestic import profit window continues to be upside down, and after mid-July , Domestic import profit window Turning losses into profits, imported copper began to flow into the market one after another; especially for some small and medium-sized traders, the number of customs clearances dropped sharply in the first half of the year due to continued inversion. With the opening of the import window, bonded area supply began to continue to flow into the country through customs clearance, accelerating the decline in inventory in the bonded area. However, from the perspective of the domestic market, not all imported copper supplies flow into domestic spot inventories, and some of the supplies flow directly to downstream processing links. Therefore, the rebound in domestic inventories is relatively slow.
Figure 2: Imported copper break-even
Data source: Mysteel
It is worth mentioning that in the early stage, some domestic refineries were forwarded to bonded areas due to unsatisfactory domestic consumption. With the opening of the import window, this type of supply has also returned to the country. .
. The delivery of goods from storage is slow, and the quality of historical inventory is not high.
As of the date of publication, the total supply of domestic electrolytic copper is 50,000 tons. However, due to the recent counterattack of the domestic epidemic, the delivery of goods from storage in North China and Hunan has been slow. Therefore, although the supply of goods has entered the hands of processing companies, it is difficult to enter the production link for a while. At the same time, in addition to the problem of picking up the goods in the second batch of storage supplies, feedback from users who have recently picked up the goods shows that because there are many products from the 1990s in this supply, the quality of the products has been significantly reduced due to long storage time, and the patina has caused The content of oxygen, iron, etc. is relatively high and is not suitable for some copper products.
Figure 3: Distribution of the first and second batches of national reserve copper in 2021
Data source: State Reserve Bureau
Judging from the supply of stocks in the past two batches, the total supply of 50,000 tons is lower than market expectations, which is good for the market The suppression of bullish sentiment is limited. At the same time, the recent trend of copper prices has gradually stabilized, and the number of subsequent supply stores may remain the same or decrease, and the pressure on copper prices may gradually weaken.
, the substitution effect of refined waste is weakening, and the forward supply of scrap copper is still tight
The substitution of refined waste at the consumer end is gradually weakening. According to Mysteel statistics, the refined waste gap in mainstream areas in China has fallen below 1,000 yuan/ton from 3,000 yuan/ton at the beginning of the year. At Yuanguan Pass, the economic benefits of scrap copper are constantly shrinking, and the market has begun to gradually shift to refined copper consumption.
Figure 4: The difference between refined and scrap in major regions in China
Data source: Mysteel
The reduction in the difference between refined and scrap is mainly due to several factors: First, the weakening of copper prices has made some scrap copper merchants who had stocked up in the early stage begin to be reluctant to sell, and merchants have taken control. The volume of shipments has led to a tight supply of goods in the market;
Secondly, the overseas epidemic has counterattacked. Currently, there are several major domestic scrap copper importing countries such as Malaysia and Japan. There has been a clear counterattack in the domestic epidemic situation in these countries, and some countries have even begun to blockades. , which is very unfavorable for the domestic supply of imported scrap copper, and it is relatively difficult to replenish the subsequent import supply. Therefore, the subsequent tense situation of scrap copper will continue in the short term, which is good for refined copper consumption.
Figure 5: Trend of new confirmed cases of COVID-19 in some countries
Data source: Internet
. The off-season is not weak, the domestic regional epidemic has counterattacked, and the impact on the consumer side is limited
According to Mysteel research, statistics of 52 refined copper pole sample companies (total sample) Capacity 12.7 million tons), the national refined copper rod production in July was 728,600 tons, an increase of 3.7% month-on-month, and a year-on-year increase of 4.7%; the refined copper rod production capacity utilization rate in July was 63.46%, a month-on-month increase of 3.7%, a year-on-year decrease of 1.7% . Statistics from 36 recycled copper rod sample companies (the total sample production capacity is 4.15 million tons), the output of recycled copper rods in July 2021 was 197,900 tons, a month-on-month decrease of 6.96%, and a year-on-year decrease of 0.35%; recycled copper rod production capacity utilization in July 2021 The rate was 57.22%, a month-on-month decrease of 6.96%, and a year-on-year decrease of 21.8%.
Figure 6: Capacity utilization rate of China’s refined copper pole enterprises from 2019 to 2021
Data source: Mysteel
Figure 7: Capacity utilization rate of China’s recycled copper pole enterprises from 2019 to 2021
Data source: Mysteel
from copper rod enterprise Judging from the start-up performance, the domestic refined copper rod start-up performance has rebounded, which is consistent with the current domestic refined scrap price difference performance and is higher than the market's off-season expectations. From a regional perspective, the Jiangsu region has rebounded more significantly. Although the epidemic has rebounded in Jiangsu since July, according to market feedback, the production of regional enterprises has had little impact. The transportation link has more impact on freight and long-distance transportation. For the region, There is no obvious impact on short-term consumption; we still need to pay attention to the subsequent progress of the regional epidemic.
