Is the 'post-crisis' rally over?
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html The 2008 financial crisis VS the 20-year epidemic crisisSince entering the 21st century, the world has encountered two global economic crises, in 2008 and 2020.
From the perspective of the cause, the 2008 economic crisis stemmed from the collapse of the global financial system caused by the U.S. subprime mortgage crisis; while the 2020 economic crisis was caused by the COVID-19 epidemic, which caused an impact on the global public health system.
Judging from the results, the economic crisis in 2008 lasted for several years. According to World Bank statistics, global GDP growth dropped to 1.85% in 2008 and further fell to -1.67% in 2009; while the economic crisis in 2020 lasted for at least one year, according to The World Bank's latest economic outlook predicts that global GDP growth will decline to -5.2% in 2020.
Judging from the performance of copper prices, they have all experienced a nearly "V"-shaped rebound. In 2008, it took about 2 years to return to the price level before the collapse, and in 2020, it only took 4 months to return to the price level before the collapse. .
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Review of the 08 "post-crisis" period, exploring the anchor of the price turning point
Data source: Wind, Jinrui Futures
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The anchor of the turning point - economic trends are the main focus, supplemented by stimulus policies
Data source: Wind, Jinrui Futures
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Epidemic interference The recovery is divided, but the economic chain continues to improve
●From the perspective of economic recovery, China, Europe and the United States have different paces of recovery due to the disturbance of the epidemic;
●Differences in epidemic prevention and control have led to secondary rebounds in Europe and the United States, but the U.S. manufacturing industry It has not been affected by this;
● However, sales, retail and other aspects are still limited by the epidemic, and the rebound is limited. The critical period of recovery will only come after the epidemic is controlled;
● Overall, the global economy is still showing signs of recovery, and it is an inflection point for economic recovery. Still hasn’t come yet.
Data source: Wind, Jinrui Futures
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China’s finance still has room for improvement, and monetary policy is tightening at the margin.
After the outbreak, China adopted active fiscal and monetary policies to boost the domestic economy, which enabled the domestic economy to recover after the epidemic was controlled. Quick fix.
There is still a lot of room for development in the current fiscal year. Due to the outbreak, the country has increased the issuance scale of policy bonds in 2020 to 8.5 trillion. The cumulative issuance from January to July was 4.3 trillion. Therefore, there is still 4.2 trillion issuance space. Significant year-on-year increase.
In terms of monetary policy, it was stated at the Politburo meeting on July 30 that "monetary policy must be more flexible, moderate, and accurately oriented. It is necessary to maintain reasonable growth in money supply and social financing scale, and promote a significant reduction in comprehensive financing costs. It is necessary to ensure that new "Financing focuses on manufacturing and small, medium and micro enterprises", which shows that my country is cautious about monetary easing policy, tightening it at the margins, and pursuing stable and sustainable development is the main goal.
Data source: Wind, Jinrui Futures
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Vaccine development has accelerated, and the progress has exceeded expectations
Countries around the world are seizing the time to develop new coronavirus vaccines, and some progress has been made: According to statistics from the World Health Organization, there are currently more than 100 new coronavirus vaccines under development around the world. in process. As of the 20th of this month, 30 candidate COVID-19 vaccines have been reported to WHO and are in the clinical trial stage; and 6 have entered Phase 3 clinical trials.
China: The emergency use of the COVID-19 vaccine was officially launched on July 22. Sinopharm said that the international clinical (Phase III) of the Sinopharm COVID-19 inactivated vaccine was conducted in Beijing, Wuhan, and Abu Dhabi year-on-year. Currently, more than 20,000 people have been vaccinated. It is safe. Very good, effectiveness is being further observed.
Data source: WHO, public information compilation, Jinrui Futures
After analyzing the rebound trend of copper prices after the 2008 global economic crisis, it is concluded that c history is always surprisingly similar, but not exactly the same:
◆ Different causes, different processes , the rhythm is different: html The source of the crisis in 2020 comes from the financial system, or problems within the economic system, and the repair process is relatively long; the source of the crisis in 2020 comes from public health issues, and the progress of the epidemic plays a decisive role in the economic repair process. Once a vaccine is popularization, the pace of economic recovery is faster;
◆ The world environment is different: The increasing prevalence of unilateralism, populism, and trade protectionism in recent years have made the international environment very different. Issues such as Sino-US relations and the relationship between the United Kingdom and the European Union have made the international environment very different. Global trade and even the economy are under greater pressure;
◆ There is a lack of "leaders" to drive global economic growth in the late period of the epidemic: html China's strong recovery and growth in the post-2088 economic crisis period have become the leader of global economic recovery, especially those driven by real estate and infrastructure. The demand effect of bulk commodities is even more obvious; my country's current economic volume has more than doubled compared with 2008, and the economic growth rate has slowed down significantly. At the same time, it has also transformed from the pursuit of "high-speed" development to the pursuit of "high-quality" development. The bottom line of "live in, don't speculate" is that the growth rate of demand for commodities has slowed down, but it is still difficult for other developing countries to have a substitution effect.
Fundamentals - high and wide shocks, focus on structural opportunities
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First half of the year: surface consumption VS terminal
There is an obvious difference between surface consumption and terminal consumption: There is a large difference between surface consumption and terminal consumption both at home and abroad. From a domestic perspective1 -Table consumption +3% in June, terminal consumption -8%. There is also a difference of nearly 2% overseas.
The main factors for the difference come from the unexpected loss of scrap copper at home and abroad, as well as the accumulation of industry, especially terminal inventory.
In addition, the loss of refined copper production was smaller than the loss of raw materials, and raw material inventories were significantly destocked in the first half of the year.
Data source: Jinrui Futures
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In the first half of the year, the supply of domestic and foreign scrap copper dropped sharply, and domestic expectations improved in the second half of the year.
Overseas scrap copper recycling affects the supply of domestic scrap copper imports through the import and export links. The copper content of scrap copper fell by about 360,000 from January to July (excluding the increase in scrap copper imported in the form of alloys)
The changes in domestic scrap copper recycling are roughly calculated through the changes in the operating rates of companies that directly utilize scrap copper, and the loss is about 10- 200,000 tons.
The loss of scrap copper will either lead to a reduction in refined copper production through the reduction of raw materials, or affect the apparent consumption of refined copper by stimulating replacement of refined copper consumption. In the first half of the year, the direct impact on consumption was about 4.5%.
Data sources: SHFE, General Administration of Customs, SMM, Jinrui Futures
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Overseas scrap copper raw material supply is still affected by the epidemic
Affected by the epidemic in the first half of the year, overseas scrap copper recycling and dismantling were greatly affected. On the recycling side, developed countries such as Europe and the United States The economy's scrap copper export volume has declined significantly, especially in April, when the performance dropped to a freezing point, with a month-on-month contraction of 20% to 80%.
As an important transit country, Malaysia’s dismantling and logistics once encountered great difficulties. At present, the logistics link is basically smooth, but the supply of dismantling raw materials still faces challenges, mainly because Europe and the United States have been affected by the second rebound of the epidemic since June, which may slow down The pace of recovery in scrap copper exports has further led to a shortage of overseas copper scrap.
Data source: Customs websites of various countries, Jinrui Futures
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Scrap copper imports in the fourth quarter will be difficult to meet expectations
Based on the volume of approvals in the third quarter and the remaining volume of approvals in the first half of the year, the import volume of scrap copper in the third quarter dropped slightly year-on-year, but considering the adoption of copper alloys this year The amount of imported metal has increased, so the import of scrap copper in the third quarter is guaranteed.
Scrap copper imports in the fourth quarter may be difficult to meet expectations. In the mid-year report, considering that the import standard for recycled copper starting from September 1st can be implemented as scheduled, imports in the fourth quarter are expected to continue to pick up on a quarter-on-quarter basis and contribute an increase year-on-year. However, the current detailed rules for recycled copper have not yet been implemented, exacerbating the uncertainty of the supply of imported scrap copper in the fourth quarter.
Data source: General Administration of Customs, Jinrui Futures
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Channel inventory is high, which will cause a certain drag on off-the-shelf consumption.
html From the perspective of the expected industrial product inventory cycle in early 2000, this year has entered a replenishment cycle. Catalyzed by the epidemic + repair work rush, companies have successively experienced passive inventory additions to active inventory additions, and the current overall inventory level is still high.roughly calculates from the days and volume of finished product inventory of downstream companies that industrial inventory increased by more than 200,000 tons in the first half of the year, accounting for about 4% of consumption in the first half of the year.
Based on the differentiation of replenishment of large and medium-sized enterprises, the pressure of destocking will be relatively high in the second half of the year. That is to say, the inventory of finished products of cable companies, which accounts for the vast majority, fell for one day, suppressing consumption by about 0.4%.
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The darkest moment at the mine end has passed, and the chain has gradually improved.
◆ In the first half of the year, refined copper was +3W, while the raw material end (concentrated scrap copper) was -28W. The inventory of smelting raw materials was further compressed, and the inventory of concentrate dropped rapidly.
◆ Mining end (by country): Chile’s interference has not yet been confirmed, H1 copper production increased by about 2.6% year-on-year; Peruvian production is recovering, and the June output fell by 9% year-on-year, which was relatively lower than the previous 20-40% decline. The ratio has narrowed significantly and is expected to return to normal levels in the third quarter;
◆ Mining end (branch company): The world's major copper mining companies have announced their Q2 financial reports. The changes in production guidance have been slightly lower than those in Q1, but the magnitude is smaller, so they remain unchanged. Copper concentrate is expected to increase slightly (10W) in the second half of the year. On the one hand, all copper mines that were suspended in the early stage have resumed production, and large-scale copper mines can return to normal levels in January to February. On the other hand, large-scale copper mine expansion and construction projects are also being restarted. The output in 2021 and 2022 is expected to Growth of 3.5% and 2.3%.
Data source: Chilean National Copper Commission, Jinrui Futures
Data source: Peruvian Ministry of Mines and Energy, Jinrui Futures
● Concentrate production is expected to continue to recover in the second half of the year, but potential interference still exists.
●The first is the change in copper output in ore-producing countries, and the second is the flow of copper from self-producing countries to demand countries.
Data source: Announcement from listed companies, Jinrui Futures
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Consumption in the off-season was weak, lower than market expectations
● After entering the off-season, domestic electric copper consumption continued to decline month-on-month, and the average daily out-of-stock volume dropped significantly. Entering August, the average daily out-of-stock volume It is not as good as the same period in previous years, and downstream consumption feedback is weak.
●Judging from the operating rates of processing enterprises, the operating rates of copper rods and copper rods continue to decline.
●Grassroots research shows that air-conditioning production will decline month-on-month in September, copper pipe consumption is expected to weaken, and there is also no sign of the peak season starting for cables, and the overall situation is weaker than previously expected.
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Terminal consumption observation angle
Original angle
● Terminal consumption observation assumes that the epidemic has disrupted the original operating logic. As various economies recover, the industry returns to its own logic. However, under the impact of the epidemic, the consumption structure has also changed. The base effect will also have an impact on consumption in the second half of the year.
●The construction completion cycle has resumed its upward trend in the second half of the year, and the scissor difference between new construction starts and completions will gradually support the completion data from the second half of 2019 to 2021.
Data source: Wind, Jinrui Futures
Power grid investment is treated neutrally
The State Grid originally planned to invest 418.6 billion yuan in 2020, and then increased the plan to 460 billion yuan. As of July, the cumulative investment in power grid infrastructure has been completed. The amount is 205.3 billion yuan, which means that the upper limit of investment in the remaining five months can reach 250 billion yuan.
Judging from the quarterly delivery volume of the State Grid Tendering Office in recent years, the second half of the year is usually the peak period of the year, but the delivery volume in the first half of this year is much higher than the level of 140,000 tons in the same period last year. Therefore, although the second half of the year Considering the growth in investment, the delivery volume is still not low, but from a year-on-year perspective, it is difficult to see a significant increase. According to
grassroots research, State Grid orders have been in a sluggish state since the off-season, with a year-on-year decline. Currently, before the traditional consumption peak season, cable companies have said that they have not yet seen any sign of a significant rebound in orders.
Structural changes
Consumption in the second half of the year has weakly improved year-on-year. The structural impact is worthy of attention. Investment consumption in the second half of the year may continue to remain stable. Although the policy inclination is limited, the original logic, especially the construction completion end, is on a moderate rise. The consumer discretionary sector is expected to maintain moderate growth amid policy inclinations.
Overseas sales still shrank slightly year-on-year in the second half of the year due to the long recovery time and the difference in consumption structure compared with domestic sales, but the decline was smaller and narrowed significantly in the first half of the year.
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Margin leverage under tight balance
The global refined copper market is expected to be tightly balanced in the second half of the year, and there will still be a slight surplus (1.1%) in the next two years. The biggest driving force for the stable and positive fundamentals of still comes from investment consumption. The increased uncertainty in imported scrap copper also creates certain benefits, but the power of industrial replenishment may drag down apparent consumption to a certain extent.
Data source: Jinrui Futures
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Story probability increases under historically low inventory
From the perspective of inventory levels, overseas explicit inventories (LME+COMEX) and China's bonded zone copper inventories are at historically low levels, and SHFE inventories are also at low levels. Therefore, with the peak season of copper consumption approaching, refined copper has once again entered the destocking stage. Low inventories have strong support for copper prices. Once consumption exceeds expectations, the probability of a "storytelling" in the copper market will be greatly enhanced.
Summary: fluctuates at high levels and wide ranges, focusing on structural opportunities
★ Macro: From a "post-crisis" perspective, the recovery of the global economy is the main anchor for determining the turning point, and changes in policies will cause disturbances to the periodic market. . The domestic economy still has the potential to recover, but the margins of monetary policy are tightening; the current epidemic has repeated the effects of overseas economic recovery, but the recovery trend is unclear, and we are waiting for the pace of recovery after the vaccine is available.
★ Fundamentals: South American mine production has been restored, and supply continues to improve month-on-month, but the disruption of the epidemic still requires attention. The detailed rules for the import of recycled copper have not yet been implemented. In the fourth quarter, the import of recycled copper to supplement the copper supply is highly uncertain and has certain support. Domestic demand is mainly supported by real estate, and the logic of real estate completion and restoration is still there. However, due to the large delivery volume in the first half of the year, power grid investment is unlikely to have a significant year-on-year boost in the second half of the year. Consumption in automobiles, home appliances, etc. continues to improve despite the economic recovery. Of course, the current price is relatively sufficient for repair expectations, but with extremely low inventory levels (refined copper and raw materials) + tight balance expectations in the copper market, copper prices continue to fluctuate mainly at high levels and wide ranges, with the center of gravity of copper prices at 6,400-6,600 US dollars/ton, but it needs Be wary of periodic declines caused by policy tightening and deterioration in international relations.
★Strategy: Counter-arbitrage opportunities under the widening margin of the gap between refined copper and concentrate; Borrowing opportunities under low inventories in both markets
★Risks: Upward risks come from higher-than-expected consumption and stockpiling, while downward risks come from policy tightening and before the U.S. election. external disturbance
This article comes from Futures Mövenpick
