Summary
The biggest uncertainty in the market at present is the Russia-Ukraine conflict . However, considering that the intensification of sanctions will first impact the supply of copper and then affect the economy, it is more likely to boost copper prices in the short term, but it cannot be excessive. Bullish.
In terms of macro, we are optimistic about overseas recovery after gradually getting rid of the influence of Omicron . However, the current sanctions on Russia may cause energy prices to rise further, push up inflation , limit economic recovery, and increase concerns about the long-term outlook for copper prices.
Domestically, efforts were made to stabilize growth in the first half of the year. Pay attention to the relevant statements at the two sessions in March. It is expected that the measures to stabilize growth will gradually take effect after the two sessions to help the economy stabilize and recover. In terms of supply and demand for
, overseas inventories are still in a low state, and domestic inventories are accumulated due to the off-season. However, we believe that the window period for inventory accumulation is limited, and the final inventory level will remain low, which will provide support for copper prices in the future.
From a market perspective, the overall impact on copper prices is not significant, but the current volatility is intensifying, and it is necessary to control positions to avoid the risk of fluctuations.
On the whole, at the current time point, taking into account the bullish view and risk control, it is recommended to hold long orders with light positions.
strategy suggestion:
continue to hold long orders, or consider buying the CU2204 contract in moderation when it falls back to around 70500.
Uncertainty risks:
The impact of the Russia-Ukraine conflict has worsened, the new coronavirus, and monetary tightening have exceeded expectations
A market review
In February 2022, the copper price trend was rising and falling , with a maximum of more than 73,000 yuan/ton, but Then the high fell back, falling below 71,000 yuan/ton, but did not break 70,500 yuan/ton. Judging from the trend after mid-February, the main Shanghai Copper contract has a strong support effect near 70,500.
2 Macro-level impact analysis
Overseas:
The situation in Russia and Ukraine is developing rapidly, European and American sanctions are not as good as expected, and market risk aversion has fallen sharply, but there is still strong uncertainty in the aftermath of the incident.
High-pressure inflation in the United States continues, but the economic recovery process has not been interrupted. The market's expectations for an interest rate hike by the Federal Reserve in March have dropped from 50 basis points to 25 basis points.
Europe continues to be troubled by energy supply shortages, and continued high inflation has slightly loosened the stance of the European Central Bank's loose monetary policy .
To sum up, the conflict between Russia and Ukraine became a major factor affecting the market in February. The ups and downs in market risk aversion have intensified the volatility of the commodity market. However, the most tense period of the current situation may have passed, and the subsequent market should pay more attention to the response measures of Europe and the United States. and energy supply stability, which will play a decisive role in the future economic situation and inflation development.
Domestic:
The National Bureau of Statistics recently announced that in 2021, the profits of industrial enterprises above designated size will increase by 34.3% compared with the previous year, with an average growth of 18.2% in the two years.
The National Bureau of Statistics released a monitoring of the market prices of 50 important means of production in 9 categories in the national circulation field. It shows that compared with mid-February 2022 and early February, the prices of 21 products increased, 27 decreased, and 2 remained unchanged. Among them, the price of liquefied petroleum gas (LPG) fell by 2% month-on-month, the price of coking coal (main coking coal) fell by 10.9% month-on-month, and the price of live pigs (external ternary yuan) fell by 6.8% month-on-month.
The latest data released by the National Bureau of Statistics on February 24 shows that compared with mid-February 2022 and early February, the prices of non-ferrous metals varied. The specific price changes are as follows: the price of electrolytic copper is 71623.0 yuan/ton, an increase of 460.7 yuan/ton or 0.6% from the previous period. The price of aluminum ingot was 22,721.4 yuan/ton, down 49.4 yuan/ton or 0.2% from the previous issue. The price of lead ingot is 15279.2 yuan/ton, up 366.7 yuan/ton or 2.5% from the previous issue. The price of zinc ingot was 25,280.0 yuan/ton, down 75.0 yuan/ton or 0.3% from the previous issue.
The National Bureau of Statistics recently released price data for January. Consumer prices (CPI) in January rose 0.9% year-on-year, slightly lower than market expectations of 1%, and rose 0.4% month-on-month. In January, industrial producer prices (PPI) rose 9.1% year-on-year, lower than market expectations of 9.5%, and fell 0.2% month-on-month; industrial producer purchasing prices rose 12.1% year-on-year, and fell 0.4% month-on-month.
The People's Bank of China authorized the National Interbank Funding Center to announce that the loan market quotation rate (LPR) on February 21, 2022 is: 1-year LPR is 3.7%, and 5-year and above LPR is 4.6%. The above LPR is valid until the next LPR is issued.
Data released by the National Bureau of Statistics on February 24 showed that the prices of various coal types across the country fell sharply in mid-February. The specific price changes of each coal type are as follows: anthracite (washed medium block, volatile content ≤8%) price is 1863.3 yuan/ton, down 71.7 yuan/ton from the previous period, a decrease of 3.7%. The price of ordinary mixed coal (a mixture of Shanxi pulverized coal and lump coal, calorific value 4,500 kcal) is 775.0 yuan/ton, a decrease of 71.4 yuan/ton, or 8.4%, from the previous issue. The price of Shanxi Dashan (high-quality blended coal with a calorific value of 5,000 kcal) was 901.7 yuan/ton, a decrease of 72.1 yuan/ton or 7.4% from the previous issue. The price of Shanxi Youmix (high-quality blended coal, calorific value 5,500 kcal) is 978.3 yuan/ton, a decrease of 109.2 yuan/ton, or 10.0%, from the previous issue. The price of Datong blended coal ( Datong blended coal, calorific value 5800 kcal) is 1053.3 yuan/ton, down 133.5 yuan/ton from the previous issue, a decrease of 11.2%. The price of coking coal (main coking coal, sulfur content; 1%) was 2329.2 yuan/ton, a decrease of 284.6 yuan/ton from the previous period, an increase of 10.9%. In addition, the national coke (secondary metallurgical coke) price in mid-February was 2,660.7 yuan/ton, down 144.2 yuan/ton or 5.1% from the previous period.
3 Fundamental Review and Outlook
3.1 Copper production will continue to recover
From the data point of view, domestic refined copper production will continue to weaken year-on-year at the end of 2021, with a year-on-year decrease of 6.1% in December, and the annual growth rate dropped to 7.4%. However, judging from the cost of copper ore rough refining, it has continued to rise since January and has exceeded the high point in December 2021. As the impact of the epidemic weakens and stimulated by high copper prices, copper mine supply is expected to continue to recover, and the supply side will maintain an upward trend in 2022.
3.2. The import window will still be closed in the short term
In 2021, copper concentrate imports increased by 7.53%, which is higher than 2020 but lower than 2018-2019. Mine-side imports are expected to see greater growth in 2022; In terms of copper and copper materials, imports decreased significantly year-on-year, with a cumulative decrease of 17.23% throughout the year. Among them, refined copper imports dropped even more, with a cumulative decrease of 22.33%; in terms of scrap copper, imports continued to increase significantly, with a cumulative increase of 79.35% throughout the year. We believe that the effectiveness of domestic policies will wait for some time, and foreign demand will be the first to recover from the epidemic. Coupled with low inventory, copper prices are expected to maintain a strong momentum, thus making the internal weak and external strong situation continue, and imports still have no advantage. It can be said.
3.3 Low inventory supports copper prices
After the holiday, LME maintained a slight destocking state, but the domestic inventory accumulation was obvious, and the inventory level increased by more than double compared with before the holiday. However, the pre-holiday inventory level this year is much lower than the same period in previous years, and considering that domestic growth stabilization measures will take effect in March, there is not much window left for inventory accumulation. It is expected that inventory levels will still be low after the inventory accumulation ends, which will support copper prices in the peak season. .
3.4 Pay attention to changes in terminal demand
After entering the Year of the Tiger in 2022, the market has continued to receive good news about real estate. Down payments have been reduced, loans have increased, and market policies are emerging, which will be beneficial to the stability of the industry in 2022. We believe that a stable real estate industry will promote completion and delivery, and the demand for copper in the real estate industry will remain stable.
In terms of automobiles, automobile sales fell year-on-year in January this year, and the performance was weak. However, the growth rate in 2021 is low, and the problem of automobile core shortage is expected to be alleviated, and the growth in 2022 is likely to be improved. In addition, new energy vehicles maintained high growth in January, and it is not difficult to achieve penetration of above 20% throughout the year, which will become an important growth point for copper demand.
In terms of power grid, the investment growth rate throughout the year still increased, changing the decline in the first three quarters. According to relevant plans and opinions, power grid investment is expected to maintain a slight growth in 2022 to ensure the stability of the basic copper demand.
In the short term, the impact of Omicron on the economy will continue to weaken, and the overseas economy will usher in a recovery, followed by domestic policy efforts. The global economy is expected to achieve a resonant recovery, and terminal demand will achieve a small explosion, which will in turn drive stronger copper prices. .
This article originates from CFC Metal Research
