The probability of copper prices remaining high in September is expected to be high
2023/9/7
On the supply side, firstly, the import volume of copper ore has decreased. In June, China's copper concentrate production was 153500 tons, a year-on-year decrease of 7.9% and a month on month increase of 14.08%. In July, the import volume of copper ore and concentrate in China was 1.975 million tons, an increase of 3.98% year-on-year and a decrease of 7.06% month on month, falling back to the normal range. In July, there were many domestic smelters undergoing maintenance, resulting in a decrease in demand for copper concentrate. As of August 25th, the inventory of copper concentrate in mainstream domestic ports was 896000 tons, a decrease of 32000 tons compared to the previous week. Overall, the domestic supply of copper concentrate remains loose, with import ore processing fees remaining above $90 per ton. In terms of overseas production, the copper production of 15 mining companies in the second quarter of 2023 was 2.971 million metal tons, an increase of 161000 metal tons compared to the previous quarter.
Secondly, there is a tight supply of recycled copper and crude copper. In July, China's scrap copper production was 105000 metal tons, a decrease of 7.08% month on month and a year-on-year increase of 61.54%. It is expected that the production will further decline to 98000 metal tons in August. In July, the import volume of scrap copper in China was 149200 physical tons, a decrease of 12.13% month on month and 3.87% year on year. July is in the off-season of consumption, and coupled with the loss of imported recycled copper raw materials in the early stage, the enthusiasm of raw material importers is relatively low.
In July, China's crude copper production was 821900 tons, a slight decrease of 0.05% month on month and a year-on-year increase of 17.18%. Among them, the amount of mineral crude copper increased slightly, while the amount of scrap copper production decreased. It is expected that China's crude copper production will rebound to 873500 tons in August. In July, China imported 85900 tons of anode copper, a decrease of 7.34% month on month and 11.32% year-on-year. In July, with the end of the concentrated maintenance of the smelter in the middle of the year, the demand for anode copper slowed down, and the processing fee for crude copper increased. However, in August, the processing fee fell again, and supply tightened.
Thirdly, the production of electrolytic copper remains high. In July, China's electrolytic copper production reached 925900 tons, an increase of 0.9% month on month and 10.2% year-on-year. In July, 7 smelters underwent maintenance, but their production still exceeded expectations, mainly due to the continuous increase in output from newly launched smelters in Shandong. In August, only one smelter had maintenance plans, and with the resumption of production of previously repaired smelters and the release of production after new plants were put into operation, it is expected that the total production of electrolytic copper in China will increase significantly in August.
Six smelters had maintenance plans in September, three in October, one in November, and none in December. It is expected that the production of electrolytic copper will slightly decrease in September, and the production will remain high in the following months.
In terms of imports, the import volume of refined copper in China in July was 287200 tons, an increase of 2.38% month on month and 2.78% year on year. In July, the loss margin of imported copper narrowed, which is conducive to the inflow of imported copper into the domestic market.
In terms of demand, firstly, there is a varying increase or decrease in the number of operations in the primary processing industry. In June, China's copper production reached 2.1097 million tons, an increase of 5.56% month on month and 4.49% year-on-year. It is estimated that the copper production in July will be 2.07 million tons, a decrease of 1.94% month on month. The overall operating rate of the copper industry in July was 72.18%, a decrease of 0.37% month on month and 1.63% year-on-year.
From a segmented perspective, the operating rates of electrolytic copper rod and recycled copper rod enterprises decreased in July. July is a traditional seasonal off-season in the industry, and copper prices remain high. Orders from the downstream enameled wire industry performed "weaker than in previous years", with a significant decline in demand for copper rods. The cable industry was dragged down by the decline in local demand, and orders from small and medium-sized cable factories did not perform well. In July, the operating rate of copper tube enterprises increased by 9.43% year-on-year, mainly due to the increase in consumption in the air conditioning market; The operating rate of copper strip enterprises has increased significantly, and the order increment mainly comes from the electrical industry and new energy industry; The operating rate of copper foil enterprises has also increased significantly, with new orders for lithium battery copper foil ports maintaining a growth trend. The copper foil end of power circuits is in the off-season of consumption, and the operating rate has slightly declined.
The second is the significant increase in the terminal power and home appliance sectors. From the data of the copper terminal industry, the newly constructed area of domestic housing continues to decline, and the growth rate of the automotive sector is not satisfactory. However, based on the fact that copper consumption is mainly concentrated during construction and completion, if copper consumption is estimated based on the completed area, the consumption of copper in the real estate sector has not decreased, but there is no significant increase. It is estimated that copper consumption is still relatively strong this year, with the increase mainly concentrated in electricity, especially in the power engineering sector, and the air conditioning industry also has a significant increase.
In terms of inventory, LME and COMEX copper inventories continue to rebound, but domestic inventories have significantly declined and are at historically low levels.
Overseas, recent economic data released by the United States has shown poor performance, with real GDP unexpectedly dropping to 2.1% quarter on quarter in the second quarter and the core PCE price index dropping to 3.7% month on month, the lowest growth rate in two years. In August, ADP employment increased by 177000 people, the lowest level in five months. The market's expectation of the Federal Reserve raising interest rates by 25 basis points in November has dropped to 41.6%.
In terms of CFTC holdings, as of August 22, COMEX copper futures non commercial long and short positions have all declined, with a slight decrease in short positions and a narrowing of net short positions to 24615.
In summary, from the supply side, there is not much disturbance in the overseas mining side. In terms of refined copper, according to the production schedule of enterprises, there is expected to be a decrease in copper production in September. Currently, the uncertainty is mainly concentrated in the consumer side. Looking at the sub sectors, it is expected that the air conditioning sector, which has made significant contributions in the early stage, will lose momentum, the power sector will maintain a high growth rate, and the new energy vehicle sector is also worth looking forward to. In the expectation of reduced supply and sluggish consumption during the peak season, the author believes that the copper supply and demand gap will slightly expand in September. In addition, copper prices are greatly affected by macroeconomic factors. If the expectation of the Federal Reserve raising interest rates continues to cool down, it is expected that copper prices will remain high in September. If they can effectively break through the 70000 yuan/ton mark, they are expected to continue to rise.
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