1、 Trend analysis
| Thiourea |
According to monitoring data from Business Society, copper prices surged significantly on March 14th, rising 4.08% in a single day, breaking through the 70000 mark and reaching a new high of 71881.67 yuan/ton since June 14th, 2022. The significant increase in copper prices is mainly influenced by the news of negotiation meetings among domestic copper smelters.
The specific situation is as follows:
Copper concentrate processing fees TC/RC have fallen to a ten-year low
Due to the continuous decline in copper concentrate processing fees TC/RC and the loss of profits for smelters, the industry’s expectations for production reduction are constantly strengthening. The current TC of copper concentrate is $15.29/ton, a significant decrease of 83.73% from the high point of $94/ton in September last year, which is the lowest point in nearly a decade. Under recent price levels, smelters are gradually experiencing increasing losses. If the smelter purchases spot copper concentrate for production, the current loss is about 1400 yuan/ton. If the smelter uses long single copper concentrate for production, the current profit is about 900 yuan/ton. The continuous decline in copper concentrate processing fees is due to the fact that the expansion rate of crude refining capacity in domestic copper smelters is greater than the supply rate of copper concentrate. It is expected that processing fees will continue to decline, possibly reaching negative numbers. Even domestic smelters undergoing maintenance may not be able to reverse the decline in processing fees.
On the 13th, domestic smelters held a meeting to discuss reducing production
The news of domestic smelters reducing production in the market has also been fermenting for some time. According to the news, on the 13th, the China Nonferrous Metals Association convened a meeting of top domestic copper smelters. In response to the continuous decline in smelting costs, each smelter may have production reduction plans in the future, but the specific amount of production reduction is not yet clear, and small smelters may be the first to be affected. The expectation of reduced production has become a key factor in the rise of copper prices.
The expectation of reduced production in this round of copper smelters may first be implemented in small factories. Although most of the top domestic smelters currently have a long order guarantee of $80 per ton for processing fees, relying on spot supply will still impact smaller smelters. After a sharp decline in TC, refineries have strengthened their efforts to purchase scrap copper.
Fundamentals:
Macro positive
Despite rising inflation data in the United States, the market still expects interest rate cuts to begin in June. On the domestic side, the State Council has issued the Action Plan for Promoting Large scale Equipment Renewal and Consumer Goods Trade in; And it will guide banking institutions to reasonably increase green credit and strengthen financial support for the production, service, and consumption of green smart home appliances. Properly reduce the down payment ratio for passenger car loans, and reasonably determine the loan term and credit limit for automobiles. The State Administration for Financial Regulation claims to accelerate the implementation and effectiveness of the coordination mechanism for urban real estate financing.
LME copper inventory slightly decreased
According to the above chart, LME copper inventories have slightly declined recently. As of the 13th, LME copper inventory was 108925 tons, a decrease of 34.26% from 165700 tons at the beginning of the year.
Supply side
Chile’s state-owned mining company Codelco stated that a worker died in an accident at the Radomiro Tomic copper mine in the northern part of the country last Friday afternoon. The company stated in a statement that activities in the mining area where the accident occurred have been suspended. Last week, the domestic electrolytic copper production was 242000 tons, an increase of 3000 tons compared to the previous week.
The overall demand side is dull
At present, downstream consumption of copper is relatively flat. Downstream demand is not as good as copper prices, and facing high pressure from processing factories, there are basically orders for on-demand procurement.
According to the annual price comparison chart of copper, the trend of copper prices in the second half of March has mostly improved in the past five years.
Future Market Forecast:
Although the news of domestic smelters reducing production continues to ferment and meetings have been held, the scale and timing of the reduction are still unclear. According to reports, the actual direct reduction in production is still very rare, and the output of most enterprises is relatively stable. From the current perspective, instead of focusing on the emphasis on reducing losses and production, what actually has a more prominent impact on production is the upcoming peak maintenance period and early maintenance of some smelters. From the current fundamental data, it can be seen that with the arrival of the maintenance period, domestic output will be gradually affected. The average monthly output in the second quarter is expected to be slightly lower than the level in March, and domestic output will fall slightly. In addition, import expectations are also slightly insufficient. Therefore, the overall tight supply situation still exists.
Overall, the sentiment driving the rise in copper prices may take some time to digest. Currently, TC prices continue to decline, domestic refineries are reducing production, and coupled with the expected impact of the Federal Reserve’s interest rate cut, it is expected that copper prices will also maintain a strong pattern. However, it is necessary to be cautious of the impact of high copper prices on market demand.
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