21 Century Business Herald reporter Peng Qiang reported in Beijing
Due to the dual impact of macro factors and weak fundamentals, global copper prices have begun to fall sharply recently. Since July 1, the lowest value of Lun Copper has fallen below US$8,000 for three consecutive trading days/ tons, reaching the lowest level since February 2021. The main domestic copper futures have now fallen to around 61,000 yuan/ton, which is also the lowest level since February 2021.
The copper price trend in the past six months has been high and then low. At the beginning of this year, especially before the Spring Festival, copper prices were boosted by optimism about the improving macro situation at that time and continued last year's rise.
html In March, the price of Lun copper rose to a maximum of 10,845 US dollars/ton, the highest value in many years; during the same period, domestic copper futures exceeded 75,000 yuan/ton, the highest value since the fourth quarter of last year. Since then, copper prices have maintained a volatile trend after falling slightly, and began to decline sharply in mid-June. html On the morning of July 5, as of the press time of 21 Century Economic Report reporter, the price of London copper was 8,049.55 US dollars/ton, and the domestic copper futures price was 61,370 yuan/ton, which were 25.78% and 18% lower than the highest value in March this year, respectively. The price dropped by more than 15% from the beginning of June.
Since early June, copper prices have continued to decline. Image source: Sina Finance
Copper products are widely used in electrical, light industry, machinery manufacturing, construction industry, defense industry and other fields, and can often be used as early indicators of economic activity. Huang Zhongxia, a researcher at
Hualian Futures, pointed out that factors such as recurring public health issues, geopolitical conflicts, and the United States entering an interest rate hike cycle have caused copper prices to turn downward.
Wang Yu, an analyst at the Copper Division of Shanghai Steel Union, told a reporter from the 21st Century Business Herald that copper prices have fallen significantly recently, affected by many factors.
In terms of macro factors, the main reasons are that the market has high inflationary pressure, the Federal Reserve has raised interest rates more than expected, and the market has strong expectations for an economic downturn in the future; geopolitical conflicts in Eastern Europe continue, and market worries are strong.
In terms of fundamental factors, public health events in the early stage have repeatedly affected market consumption, and industries such as terminal home appliances and automobiles are in a weak situation; in addition, the output of electrolytic copper continues to rebound, imports have shown a growth trend, and domestic electrolytic copper supply The pressure has increased, but the consumer side has not improved, but has become weak.
The drastic changes in copper prices in the short term have also had an impact on different links downstream of the industrial chain.
Huatai Futures pointed out that due to the relatively violent price drop, copper downstream companies have been seriously afraid of falling in recent times and have refused to purchase; during the settlement at the end of the first half of the year, traders' willingness to receive goods also fell to the bottom. It was not until last Friday that after entering July, the transaction situation picked up. And it is mainly due to the flow of goods from traders, and downstream consumption has still not improved.
Wang Yu said that with the recent sharp fall in copper prices, for market smelting companies, procurement costs have dropped significantly and financial pressure has also been reduced. However, the value preservation costs of smelting companies have rebounded significantly; for the circulation link, trade liquidity has dropped significantly. Due to the rapid decline in copper prices, some positions were not evacuated in time. The cost of acquiring goods in the early stage was high, but the willingness to ship at the end was weak.
For downstream companies, they will face re-pricing of finished product purchase contracts by terminal companies, and even the risk of default. The continued decline in prices has caused copper downstream companies to be very cautious in purchasing goods.
Huatai Futures pointed out that it is expected that the consumption situation will still be difficult to see a significant improvement this week, but with the introduction and implementation of various domestic support policies, demand is expected to gradually improve in the middle and late this month.
Looking forward to the future trend of the copper market, Wang Yu pointed out that the Fed's interest rate hikes will continue to ferment, and market concerns are still strong, indicating that inflationary pressure still exists and the risk of economic downturn is greater, so the macro copper price is still mainly falling.
htmlJuly and August are the off-season for copper consumption, and consumption is restricted. In addition, spot supply pressure has gradually increased recently, so the fundamentals also support the weakening of copper prices; however, the early downward trend of copper prices was too obvious, and there is a short-term correction.Wang Yu said that the general trend of copper prices in the third quarter was still mainly downward, with signs of a short-term correction midway.
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