The end of the Fed's interest rate hike
Since the beginning of the year, European and American banks risk events lead to higher copper price amplitude. Thanks to the historic change in new energy, copper supply is expected to be a small shortfall this year, and support the future strength of copper prices.
The influence of the US dollar on copper prices has gradually weakened
On Friday, Labor Department data showed 236,000 nonfarm jobs were added in March, compared with market expectations of 238,000. Unemployment rate at 3.5% versus 3.6% expected and last; Hourly earnings rose 4.2 percent from a year earlier, the slowest pace in nearly two years. The data suggest that the US Labour market has cooled but remains resilient. Because the survey was conducted in mid-March, the non-farm survey did not fully reflect the impact of bank risk events. With actual data largely in line with expectations, copper prices traded in a tight range in domestic overnight trading on Friday, with European and US markets closed for holidays.
Bank risk events in Europe and the United States led to a risk-off market sentiment and expectations of the end of the Fed rate hike. If the signs of recession are clear, the Fed could cut interest rates this year. In the short term, the Federal Reserve is unlikely to change the monetary policy guidance, the probability of the dollar range fluctuation, the impact on copper prices gradually weakened.
High probability of continuous stability of smelting output
Since the beginning of this year, there has been a slight disturbance in the supply of concentrate, now has basically stabilized. Peru's political situation has stabilised, Minmetals has resumed shipping from its mines, and First Quantum has resumed production after reaching an agreement with the Panamanian government. Copper concentrate supply has maintained high growth in recent years thanks to increased investment in mines around the world. It is estimated that about 685,000 tons of new concentrate will be supplied this year and 650,000 tons next year, mainly from Chile (281,000 tons), Peru (226,000 tons) and DRC (59,000 tons).
In the first two months of this year, domestic copper smelting output was 1.945 million tons, up 10.6 percent year on year. In mid-February, the 400,000-ton smelting capacity of Daye Nonferrous Metals in Huangshi was put into operation, and the domestic smelting capacity continued to increase slightly. Under the condition of abundant concentrate supply and good processing profit, domestic copper production will continue to grow positively.
Stocks on the world's major exchanges and in Shanghai's bonded warehouses now stand at about 400,000 tonnes, up sharply from 200,000 tonnes at the end of last year and down slightly from the peak of the off-season consumption in February. LME data show that nearly half of LME inventories are now held by one institution alone, with warehouse receipts concentrated.
New energy is still the main driver of demand
Data from the National Bureau of Statistics showed that in the first two months, the downstream copper industry chain generally performed well, especially solar power installations and air conditioning output.
From January to February, solar power installations increased by 88% year on year, while wind power only increased by 2% year on year due to winter construction. The total installed capacity of hydropower, thermal power and nuclear power increased slightly. From January to February, power grid investment increased by 2.2% year on year, continuing positive growth. If solar needs 0.45 million tons of copper per GW, solar will need 250 million tons more copper this year than last year.
From January to February, domestic automobile output fell by 14% year-on-year, and the penetration rate of new energy vehicles increased to 30%. As the end of last year fuel vehicle purchase tax exemption cancelled, leading to last year's consumption advance, this year's auto production probability is negative growth. Based on the data from January to February, the demand for automobile copper is expected to drop by 50,000 to 100,000 tons compared to last year. Due to the increase of copper demand per unit of new energy vehicles, the increase of its permeability is expected to stabilize the copper demand of the transportation equipment industry.
From January to February, the overall performance of domestic household appliances was good, especially the output of air conditioning increased by 10% year-on-year. From the air conditioning production data, the second quarter will continue to high growth. A positive year-on-year growth in the area of completed real estate, a recovery in consumption after the pandemic, and consumer stimulus policies such as trade-ins and subsidies for green energy conservation have helped to release the demand for air conditioners. Home appliance exports continued negative growth, mainly due to the impact of inflation control in Europe and the United States led to a decline in consumption.
From January to February, real estate construction area, construction area and investment were still negative growth, but the rate of decline slowed down. The completed area increased by 8% year on year, driven by the good news of "building protection". In the domestic multiple favorable support, the real estate industry is expected to stabilize within the year.
Copper supply is expected to fall slightly short this year
Copper supply growth is expected to remain positive this year, and if the agency counts 685,000 tonnes of new concentrate production, global supply growth this year is about 3.1 per cent. On the demand side, it is expected that the domestic real estate industry will stabilize, the investment in new energy power supply will continue to grow at a high rate, and the investment in power grid will have a slight positive growth. Although the total output of automobiles may grow at a negative rate, the increased penetration rate of new energy vehicles is expected to stabilize the demand for copper in the transportation equipment industry, and the output of household appliances will continue to grow at a positive rate. Global copper demand is expected to grow by about 3.8 per cent as a share of domestic and foreign demand. Global supply is expected to fall short by about 150,000 tonnes this year.
