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Summary
Opinion:
Overseas recession expectations continue to heat up, inflation remains high, monetary tightening policy continues to advance, the economic prosperity index has dropped significantly, market risk appetite has further declined, the logic of market trading recession expectations has become mainstream, and copper prices have also remained weak;
Domestically, the downward pressure on the economy is still great, but with the support of various policies, the situation is better than abroad. In particular, sectors such as infrastructure and automobile consumption are expected to become the main forces stabilizing the economy. Real estate is also expected to bottom out. If domestic demand exceeds expectations, , is expected to become the main driving force for the rebound in copper prices;
data shows that copper inventories have generally remained stable over the past period of time, indicating that after the epidemic is over and replenishment is completed, demand in the domestic midstream and downstream sectors has slowed down again, and in the future, attention should be paid to the full resumption of work The resumption of production and various domestic policies will further stimulate demand, and the focus will be on whether global explicit inventories can be further reduced.
On the whole, macro-level expectations are still weak, leading to a downward trend in copper prices. Phased improvements in fundamentals are expected to contribute to a rebound in copper price fluctuations.
Strategy suggestion:
Continue to hold short positions on Shanghai copper. It is recommended to gradually reduce positions and stop profits when it falls below 60,000 yuan/ton. If it falls below 58,000 yuan/ton, you can consider buying for rebound.
Uncertainty risks:
The new crown epidemic, monetary tightening policies, and the effects of domestic economic stimulus policies.
一
Market Review
In June 2022, copper prices fell sharply, with the lowest close to 61,000 yuan/ton. Lun Copper once fell below 8,000 US dollars/ton, and recession trading became the mainstream of the market.
二
Macro-level impact analysis
Overseas: Recession expectations have increased, risk appetite has fallen rapidly
In terms of employment, 390,000 new non-agricultural jobs were added in May, which was significantly higher than the expected increase of 320,000, the highest since May 2021. Minimal increase. At the same time, the number of new non-farm jobs in April was revised up to 436,000 from 428,000. If the current pace of non-agricultural employment growth is followed, it is expected to return to pre-epidemic levels in July-August 2022. From the perspective of employment supply, the U.S. labor market supply continues to recover. The current number of non-agricultural employment is still close to 0.5% short of the pre-epidemic level, and the unemployment rate is 3.6%, the same as the previous period, the lowest level since March 2020. Judging from the labor participation rate , after the supplementary unemployment benefits were stopped, employment willingness continued to recover. After a slight decline in the labor participation rate in April, the labor participation rate rebounded slightly in May.
In terms of inflation, the U.S. CPI rose again year-on-year in May, exceeding market expectations. In terms of items, food CPI increased by 1.2% month-on-month, setting a new high since the epidemic and rising month-on-month for 18 consecutive months. Household food prices have increased significantly, with grain prices rising significantly higher than in April. Energy CPI increased by 2.9% month-on-month. Gasoline, oil, and fuel prices all turned from negative to positive month-on-month. Energy services and electricity prices also increased slightly. In terms of core CPI, the core CPI in May was 0.6% month-on-month. Due to the base number, its year-on-year increase continued to fall. In terms of items, the prices of core commodities increased by 0.7% month-on-month, and commodity items showed general increases. The US May core PCE price index was 0.3% month-on-month, which was better than the market expectation of 0.4% and was the same as the previous value. Measuring the core PCE price index is controversial because some of the prices of goods that have the greatest impact on daily life are not included, such as lower emphasis on the rising costs of items such as housing.If core PCE continues to decline, it will still be a strong signal for policymakers.
In terms of market sentiment, the preliminary value of the Markit manufacturing PMI in the United States in June was recorded at 52.4, a 23-month low, and significantly lower than the expected 56, which was 57 in May. The initial value of the manufacturing output index was recorded at 49.6, a 24-month low, far lower than the 55.2 last month. The final value of the U.S. Markit manufacturing PMI in May was 57, which was expected to be 57.5 and the previous value was 57.5. Strong growth in manufacturing output in May should help drive GDP growth in the second quarter, with production growth well above the average over the past decade. However, growth has slowed as producers report ongoing issues such as supply chain delays, labor shortages and slower demand growth.
In terms of policy, The Federal Reserve announced its latest interest rate decision in June, raising the benchmark interest rate by 75 basis points to a range of 1.50%-1.75%. The rate hike was the largest since 1994 and the first rate increase in the past 27 years. 75 basis points. So far, the Federal Reserve has raised interest rates at three consecutive meetings, raising interest rates by 25 basis points and 50 basis points respectively in March and May this year. Different from the unanimous consent of the previous meeting in May, at this meeting, one of the voting members of the Federal Reserve Monetary Policy CommitteeFOMC objected to raising interest rates by 75 basis points. The opponent, Kansas City Fed President Esther George, advocated this rate hike by 50 basis points.
In Europe, in June, the initial Eurozone composite PMI value was 51.9, down 2.9 points from 54.8 last month. The services PMI was 52.8, down from 56.1 last month. The manufacturing PMI was 52.0, down from 54.6 last month and falling to a 22-month low. The manufacturing output index was 49.3, falling below 50. Economic growth in the Eurozone is showing signs of weakness, mainly because the growth effect brought about by the previous rebound in demand after the epidemic is fading, and rising prices have further led to a decline in business and consumer confidence. The Eurozone consumer confidence index continues to decline. Although industrial and service sector confidence has rebounded, consumer and retail trade data this month show that overall expectations are still marginally declining, especially as households consider purchasing large-ticket items and have concerns about household savings. When forecasting, take a more pessimistic view. .
Domestic:
National Bureau of Statistics : From January to May 2022, the profits of industrial enterprises above designated size nationwide increased by 1% year-on-year
The latest data released by the National Bureau of Statistics show that from January to May 2022, the profits of industrial enterprises above designated size nationwide achieved operating income 53.16 trillion yuan, a year-on-year increase of 9.1%; total profits were 3.441 billion yuan, a year-on-year increase of 1%. During the
period, the mining industry realized a total profit of 708.27 billion yuan, a year-on-year increase of 1.31 times; the manufacturing industry realized a total profit of 2.55795 billion yuan, a decrease of 10.8%; the electricity, heat, gas and water production and supply industry realized a total profit of 174.79 billion yuan, a decrease of 24.7% %.
Among them, among the 41 major industrial industries, the total profit of 16 industries increased year-on-year, 24 industries declined, and 1 industry turned from a loss to a profit.
National Bureau of Statistics: In May, coal and petroleum profits continued to grow exponentially
htmlIn May, the energy supply guarantee policy was implemented in depth, and the output of energy products maintained rapid growth. Coupled with high prices, the profits of the coal, oil and natural gas mining industries were boosted. Year-on-year increases of 1.16 times and 1.26 times respectively. These two industries together drove the profit growth of industrial enterprises above designated size by 9.5 percentage points.
Ministry of Transport: In May, 3304.6 billion yuan of investment in fixed assets in transportation was completed, a year-on-year decrease of 2.7% in April turned to an increase of 2.8%
Data from the Ministry of Transport showed that in May, 304.6 billion yuan of investment in fixed assets in transportation was completed, up from 2.7% in April. The year-on-year decrease of 2.7% turned into an increase of 2.8%. Among them, 248.6 billion yuan of highway investment was completed, a year-on-year increase of 7.3%; 13.2 billion yuan of water transportation investment was completed, basically the same as the same period last year. From January to May, 1.2 trillion yuan of investment in transportation fixed assets was completed, a year-on-year increase of 4.9%. Among them, 934.9 billion yuan of road investment was completed, a year-on-year increase of 7.6%; 56.3 billion yuan of water transportation investment was completed, a year-on-year increase of 0.6%.
Central Bank of China Governor Yi Gang said that monetary policy will continue to focus on the total amount.
Regarding the current monetary policy orientation, Yi Gang said that China's monetary policy has always been consistent with supporting the development of the real economy.The growth rate of broad money (M2) and social financing scale basically matches the growth rate of nominal GDP, maintaining reasonable and sufficient liquidity, and supporting the development of small and medium-sized enterprises to achieve the goal of maximizing employment.
As far as interest rates are concerned, Yi Gang believes that China's market interest rates have been stable and declining over the past ten years. The level of natural interest rate is mainly determined by the marginal product rate of capital and the long-term development trend of population. China's interest rate formation mechanism is determined by market supply and demand. The central bank guides market interest rates through the use of monetary policy tools . Currently, the interest rate on time deposits is about 1%-2%, and the interest rate on bank loans is about 4%-5%. At the same time, the bond and stock markets are operating relatively efficiently. Taking into account the level of inflation, it can be seen that the level of real interest rates is quite low, allowing financial markets to allocate resources efficiently.
At present, my country’s prices continue to maintain a moderate trend, providing more space for the advancement of domestic stabilizing growth policies. In terms of inflation, Yi Gang said that China’s inflation outlook is relatively stable. "Maintaining price stability and maximizing employment are the focus of our work."
Six departments: By 2025, the energy consumption of added value of industrial units above designated size will decrease by 13.5% compared with 2020
In order to further improve the energy utilization efficiency of in the industrial field and promote optimization Energy resource allocation, six departments including the Ministry of Industry and Information Technology, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Ecology and Environment, the State-owned Assets Supervision and Administration Commission of the State Council, and the State Administration for Market Regulation jointly issued the "Industrial Energy Efficiency Improvement Action Plan" (hereinafter referred to as the "Action Plan"), which proposes that by 2025, the energy efficiency of key products in steel, petrochemicals, non-ferrous metals, building materials and other industries will reach the international advanced level, and the energy consumption of the added value of industrial units above designated size will decrease by 13.5% compared with 2020.
In May, China’s international trade in goods and services had a surplus of US$52.4 billion
On June 30, The State Administration of Foreign Exchange released data on my country’s international trade in goods and services for May 2022. It showed that in May this year, the scale of my country’s international trade in goods and services import and export 3,757 billion yuan, a year-on-year increase of 14%.
Among them, the export of goods trade was 1,866.2 billion yuan, the import was 1,464 billion yuan, a surplus of 402.2 billion yuan; the export of service trade was 188 billion yuan, the import was 238.8 billion yuan, and the deficit was 50.8 billion yuan. The main items of service trade are: the import and export scale of transportation services is 178.2 billion yuan, the import and export scale of other commercial services is 72 billion yuan, the import and export scale of travel services is 58.5 billion yuan, and the import and export scale of telecommunications , computer and information services is 52.9 billion yuan.
Measured in US dollars, in May 2022, my country's international trade in goods and services exported US$306.3 billion, imported US$253.9 billion, and had a surplus of US$52.4 billion.
National Bureau of Statistics: my country's output of ten non-ferrous metals from January to May was 27.248 million tons, a year-on-year increase of 0.9%
According to data from the National Bureau of Statistics, my country's output of ten non-ferrous metals from January to May was 27.248 million tons, a year-on-year increase of 0.9%. Among them, the output of refined copper, lead, and primary aluminum was 4.4 million tons, 2.999 million tons, and 16.39 million tons respectively, a year-on-year increase of 3.2%, 3.6%, and 0.3% respectively; zinc output was 2.721 million tons, a year-on-year decrease of 0.9%. From January to May, the output of copper processing materials was 8.26 million tons, a year-on-year increase of 0.1%; the output of aluminum materials was 24.519 million tons, a year-on-year decrease of 1.7%.
National Bureau of Statistics: Manufacturing PMI returned to the expansion range in June
Zhao Qinghe, senior statistician at the Service Industry Survey Center of the National Bureau of Statistics, said that in June, the manufacturing PMI rebounded to 50.2%, returning to the expansion range after three consecutive months of contraction. . Among the 21 industries surveyed, 13 industries PMI are in the expansion zone. The manufacturing industry continues to expand and positive factors continue to accumulate.
Specifically, the recovery of production and demand is accelerating. As the resumption of work and production continues to advance, the previously suppressed production demand of enterprises has accelerated. The production index and new order index were 52.8% and 50.4% respectively, which were 3.1 and 2.2 percentage points higher than the previous month, and both rose to the expansion range. Looking at the industry situation, the two indexes of the automobile, general equipment, special equipment, computer communication electronic equipment and other industries are higher than 54.0%, and the recovery of production and demand is faster than that of the manufacturing industry as a whole. At the same time, policies and measures such as logistics guarantees and smoothness have been effective. The supplier delivery time index was 51.3%, 7.2 percentage points higher than the previous month. The supplier delivery time was significantly accelerated compared with the previous month, effectively ensuring the production and operation of enterprises.
三
Fundamental Review and Outlook
3.1 Copper production is expected to continue to pick up
From the data point of view, the growth of domestic refined copper production continues to slow down, with a year-on-year increase of 3.2% from January to May, 1.2% lower than the growth rate from January to April. percentage points, but the growth rate picked up month-on-month in May. From the perspective of copper ore rough refining costs, TC/RC has continued to fall since early May, which may mean that copper ore supply has become tight relative to smelting capacity. Better smelting costs and higher sulfuric acid prices have supported the production enthusiasm of smelters, and output is expected to continue to improve month-on-month in June.
3.2. Imports are expected to maintain a recovering trend
In May 2022, the impact of the epidemic eased, and copper ore imports picked up. The cumulative growth rate from January to May rose to 6.22%; in terms of copper and copper materials, the cumulative growth rate from January to May was 1.6%. Among them, refined copper imports decreased by 1.28% cumulatively, and imports increased by 5.54% in May, ending the continuous decline in the past two months; in terms of scrap copper, imports increased by 13.8% in May, and the cumulative growth rate from January to May increased to 6.9%. We believe that as the impact of the epidemic is eliminated and imports remain profitable, copper imports are expected to continue to pick up and maintain positive growth from June to July.
3.3 Copper inventory depletion slowed down
html At the end of May, as the domestic epidemic situation eased and work and production resumed, copper inventories began to be depleted. In June, LME inventories fell significantly, and domestic levels remained at low levels. However, judging from the trend of inventory changes, destocking has slowed down significantly after mid-June, indicating that demand is lower than expected. Analysts believe that whether demand can further increase after the full resumption of work and production in July is an important factor in determining the height of the rebound after this round of copper prices bottom out.
3.4 Overall consumer demand remains weak
html Grid investment increased by 3.1% from January to May, 1.6 percentage points slower than the growth rate from January to April. In the first five months, real estate investment fell by 4% year-on-year, 1.3 percentage points lower than from January to April. The real estate market bottom is expected to have appeared, but there is huge uncertainty about the extent of improvement. From January to May, the output of major domestic appliances continued the downward trend. In terms of automobiles, there was a month-on-month improvement in May. It is expected that with the launch of various consumption policies and , the automobile industry will continue to improve. However, the automotive industry is expected to be difficult to support the growth in copper demand alone.
Analyst: Zhang Weixin
Futures Investment Consulting Practitioner Certificate Number: Z0015332
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