Global asset prices are expected to remain strong, but the probability of adjustment is greater than in February, which deserves vigilance. Fundamentally, there was little change in domestic supply in February, with smelters operating normally. However, downstream production was suspended due to the Spring Festival holiday, and demand was significantly refined. It is expected that domestic demand will pick up in March, but the supply side of factory maintenance will be tight, and the market will mainly consume inventory.
spot market, domestic supply exceeded demand in February, mainly due to the large number of downstream shutdowns during the Spring Festival holiday and the normal production of upstream smelting. However, the upward influence of copper futures is greater, and the spot quotation has increased significantly. Most of the holders are shipping at a discount, the transaction activity is not high, and the market has not recovered yet. In terms of
inventory, explicit inventories in the three places increased and decreased in February. Overseas inventories showed little change, while domestic inventories surged. Specifically, as of February 25, LME copper inventories increased by 4,000 metric tons to 78,575 metric tons from the previous month, an increase of 5.36%; COMEX copper inventories decreased by 6,631 short tons to 68,607 short tons, a decrease of 8.81% from the previous month; The Shanghai Futures Exchange's copper inventory increased by 37,115 tons to 56,925 tons, a cumulative increase of 187.35%. The increase in domestic copper stocks this month is mainly due to the downstream market closure during the Spring Festival holiday. Domestic stocks are expected to be gradually consumed in March.
The macro and micro resonance behind this round of skyrocketing copper prices
The extremely low global inventory levels and the tight mine end have provided strong support for copper prices. On the macro level, the logic of continued economic recovery under loose global liquidity has not changed, inflation expectations are improving, the overall market optimism is fermenting, and risk appetite is rising. At the same time, under the background of the national "carbon neutrality" strategy, the demand outlook for copper is optimistic. Under macro and micro resonance, copper prices continued their upward trend.
Potential risks that cannot be ignored
First of all, the spot market showed obvious fear of high prices, trading volume was light, and spot discounts continued to expand. If actual consumption support is insufficient in the later period, the continued rise in copper prices may trigger market closing. Secondly, as the price of refined copper rises rapidly, the price difference between refined copper and scrap has widened. The tight supply of scrap copper is expected to ease in mid-to-early March, which may replace refined copper consumption. In terms of funds, long positions are currently crowded, and CFTC’s non-commercial net positions are at a high level in the past decade, which will lead to increased market volatility. Once a correction occurs, beware of trampling risks. In addition, the current market expectations are too consistent, and we need to be alert to the risk of expected deviations (actual demand is less than expected, and the improvement of the epidemic may trigger the risk of tightening monetary policy).
Conclusion: The current overall macro environment is still warm, the logic of economic recovery under loose global liquidity has not changed, inflation expectations are rising, and at the same time, the fundamentals of extremely low global inventory levels and tight mining support still exist. The positive trend of copper prices has not changed, but after the rapid rise in copper prices in the short term, we need to beware of the risk of a correction.
predicts that spot copper prices are expected to rebound rationally in March, but there is not much room for downside. The main reason is that financial strength still exists, and market smelters are undergoing maintenance in March and April, and supply concerns provide support for copper prices.
html In February, domestic copper scrap prices soared, and the center of gravity shifted significantly. html There were obvious differences in the transaction status between the upstream and downstream copper scrap markets in February. Affected by the general bullish sentiment, traders were hoarding goods and reluctant to sell, and copper factories were under greater pressure to purchase raw materials. However, the inventory of downstream cable factories was low, and the transaction activity of hypoxic rods was high. .Factors affecting the price trend of scrap copper this time include: macro-fund speculation and hot money flowing into the market too much, copper futures broke through the 70,000 yuan/ton mark, and scrap copper increased significantly; the supply of scrap copper market has become the main theme of the market in the short term, and the supply side has formed a solid support. Due to the current easing monetary policies of various countries and high financial leverage rates, it is difficult to make short-term corrections. It is expected that the price of scrap copper will be easy to rise but difficult to fall.
