Can Stocking and Inventory Changes Help Copper Market Under Macro-Benefit?

In the past two days, Shanghai Copper's main contract 1903 increased its position by about 35,000. The Shanghai copper in Masuko's downtrend was 

dominated by pessimism. Shanghai copper also hit a 19-month low. What is the reason behind the continued weakening of copper prices before the 

Spring Festival? How will this month be interpreted?


Economic downturn & dollar rate hike cycle
In the global manufacturing PMI announced in December, we can easily see the global economic downturn.

In China, Caixin announced that in December 2018, Caixin China's manufacturing PMI recorded 49.7, down from 0.5 percentage points in November. For 

the first time since May 2017, it fell into the contraction zone, indicating that the downward pressure on China's economy has gradually increased. This trend 

is consistent with the National Bureau of Statistics manufacturing PMI. The National Bureau of Statistics announced that the manufacturing PMI for December 

was 49.4, down 0.6 percentage points from November, and it fell into the contraction for the first time since August 2016.

In the US, manufacturing expansion has slowed, and new orders have grown to the lowest level in more than a year. Part of the reason for the slowdown is 

the capacity constraints and the difficulty of finding the right employees and the difficulty of obtaining a sufficient amount of procurement investment. As the 

certainty rises, companies will become more cautious about spending.

In Europe, the Italian and French manufacturing PMIs are already below the dry line, and the overall PMI in the Eurozone hit a new low since February 2016.

The expected economic downturn is superimposed on the strength of the US dollar during the 2018 rate hike cycle, and the non-ferrous metals are under 

pressure.


Dollar index
Downstream consumption is weak, infrastructure will still take time

At present, the overall consumption of copper downstream is weak. In addition to the seasonal demand for copper pipes, the demand for wires and cables, 

terminals, automobiles and home appliances are all weak, and the market demand for infrastructure is hard to pick up before the year. CITIC Securities clearly 

believes that although it has already smelled the signs of infrastructure development, considering the impact of the temperature drop after December, it is 

difficult to start a large-scale construction and the subsequent Spring Festival shutdown. Under optimistic circumstances, infrastructure investment will not be 

large until 3-4 months. Starting work, and the data of the old caliber of the month (excluding special debts) and the real economy will have to wait until 

April-May, and the fundamental probability will remain weak.




In December, the operating rate of wire and cable enterprises was 83.01%, and the operating rate decreased by 3.19 percentage points from the previous 

month and decreased by 2.29 percentage points year-on-year. At the same time, it is expected that the operating rate of wire and cable enterprises will 

continue to decline in January. Near the Spring Festival, terminal demand has not yet recovered, and the weather cooling project will also slow down. Many 

cable companies have indicated that production lines will be discontinued in late January.

The premium is still strong. Traders are still cautious.

In terms of spot, today's Shanghai electrolytic copper spot on the current month's contract reported a rise of 60 ~ liters of water 190 yuan / ton, flat water 

copper transaction price of 46,740 yuan / ton ~ 46,800 yuan / ton, premium copper transaction price of 46,850 yuan / ton ~ 46,900 yuan / ton. After the first 

phase of the over-selling and post-adjustment, the transaction has improved. In the second quarter of the exchange, the supply of Pingshui copper was too 

high. The quotation continued to decline, and the price was lowered to 60~70 yuan/ton. The good copper price was firm. Change, wet copper supply turned 

the whole line, the market concentrated in Pingshui ~ premium 20 yuan / ton. The price of copper has fallen sharply. Although the import window is open, but 

the domestic supply is small, the holders have a willingness to raise the water. It is expected to attract some downstream retreats. Traders are still cautious. 

It is understood that there is not a lot of downstream in the downstream. The goods are still dominated by the pessimistic sentiment that copper prices have 

fallen sharply.

It is expected that the overall price of copper will weaken in January, especially when the price of copper breaks to a new low of 19 months. In the past two 

days, the main contract of Shanghai copper has increased by about 35,000 in 1903. The copper in the downswing is dominated by pessimism. The pace of 

stocking and stock changes before the Spring Festival. Jingchuan, deputy general manager of Zhongda Futures, said that copper prices were weaker in January, 

and the copper market is still in the low season of consumption. The weak economic data hit the capital market, and copper prices were also under pressure 

and weak in the short term.

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Shirley N.//SMC Editor