December 7, copper prices after a strong rise in the past half a month, high profit closing gradually increased, short-term high volatility or intensified, do not rule out the possibility of falling. However, due to the accumulation of positive factors inside and outside, copper prices are still in an upward trend.

Since mid-november, copper prices have risen strongly, breaking the four-month Oscillation pattern of Shanghai copper, and have broken through a number of resistance, hit a recent seven-year high. With higher profit-taking gradually increasing, copper prices in the short-term or a wide range of oscillation trend, but due to the vaccine research and development of good news, the US election lost, China's economy continues to improve and overseas consumption is expected to pick up, the upward trend in copper prices is not over.

1. overseas economic recovery is expected to strengthen

There has been a lot of good news about vaccine development recently. Several vaccines have been declared to be more than 90% effective. World Health Organization expects several vaccines to be available by the end of the year, and both the UK and Russia are planning to receive vaccines in the near future, not only has the market greatly reduced concerns about overseas outbreaks, but expectations of a global economic recovery and an upturn in inflation next year are higher.

The positive impact of the vaccine has been fully absorbed by the significant strengthening of copper prices, although it will take time for the vaccine to be produced and widely used, thanks to the collective strength of the coloured sectors benefiting from the economic recovery and the rebound in inflation. The end of the US election, the signing of the world's largest free trade agreement, reduced political and trade uncertainty, the market risk appetite is high. The two parties have resumed fiscal stimulus talks for the first time since the election and a new fiscal bill is expected by the end of the year. The continuation of loose monetary policy in the United States and the expected increase in fiscal stimulus will keep the dollar weak and provide strong support to the Non-ferrous metal. In addition, China's October official and Caixin manufacturing PMI both exceeded expectations and hit a staged new high, and the economy showed signs of accelerating recovery.

2. Copper concentrate processing costs remain low

At present, the number of newly confirmed cases in Chile is basically stable at the level of more than 1,000 people per day, and Chile has achieved a good balance between epidemic prevention and production activities, with no significant impact on mining activities, 1. Copper production in Chile edged up 0.4 percent to 4.26 million tons in September. The newly confirmed cases in Peru remained stable at about 2,000 per day, and the impact of the epidemic on overseas copper production has weakened significantly, but recovery has been relatively slow. 1. Copper production in Peru was 1.5138 million tons in September, down 16.6 percent year-on-year, or about 300,000 tons. Copper production in September was 171,800 tonnes, down 11.4 per cent month-on-month and 15.7 per cent year-on-year. With no significant recovery in copper production, the spot processing fee TC for copper concentrates has remained below $50 per ton since mid-july, severely squeezing smelter profits. However, in the year-end Sprint high production schedule, is expected in November, December China's electrolytic copper production will be maintained at 820,000 tons.

3.year-end consumption is more optimistic

In November, copper processing enterprises reported an improvement in orders, and the operating rate of refined copper bar and copper pipe enterprises rose in various degrees compared with the same period last year. SMM estimates that the average operating rate of Chinese copper processing enterprises was 74.91% in November, month-on-month growth of 1.67 percentage points, up 3.2 percentage points year-on-year. In the end-use segment, the auto industry continues to be strong, with the federation forecasting a 3% month-on-month increase in daily retail sales in November, up 5% from a year earlier. Household appliance exports remain strong, air-conditioning production and sales better than seasonal performance in October, the cumulative year-on-year decline in production and sales continued to narrow. FOURTH QUARTER POWER ORDERS MAINTAINED LOW growth rate. Under the pressure of the three red line, housing enterprises are expected to "price for volume" to accelerate the fourth quarter of housing sales and completion. However, the standards for recycled copper and brass have been implemented since November, and the subsequent import of scrap copper is expected to pick up, adding high copper prices to push up the price gap between refined and waste copper, and the substitution effect of scrap copper is expected to be strengthened to curb consumption of refined copper.

Lower consumption overall better than market expectations, domestic inventory continued to fall, the previous copper inventory is currently less than 100,000 tons, cash premium remained high. At present, the bonded area inventory is at a high level of 400,000 tons, leading to a global increase of about 170,000 tons compared to the same period last year. Current electrolytic copper import window opened, follow-up customs clearance material increased, bonded zone inventory is expected to end the rise or even turn down.

To sum up, copper prices in the past half a month after a strong rise, high profit closing gradually increased, further upward market resistance increased, short-term high volatility or intensified, do not rule out the possibility of decline. However, copper prices are still on an upward trend as new crown vaccination is imminent, US fiscal stimulus negotiations are moving forward and Chinese consumption is better than expected. After breaking through the resistance level of 56,000 Yuan/ton, Shanghai copper is expected to make a tentative move to 60,000 yuan/ton, whether the breakthrough still needs to be concerned about the follow-up release of overseas consumption.

Source: Futures Daily