The hottest low inventory and weak consumption coe

2022-08-22
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Low inventory and weak consumption coexist to buy Comex copper and throw Shanghai copper arbitrage opportunities appear

many companies in the world have imposed restrictions on the emergence or limited control of some materials contained in materials.

after the active contract of Shanghai copper fell 13.6% in 2018, it rebounded sharply by 9.8% from mid January to early March 2019. On the one hand, the driving force of the rebound comes from the expectation of demand improvement brought by China's adoption of a new round of counter cyclical monetary and fiscal policies; On the other hand, it comes from the easing of trade frictions between China and the United States, and some of the rebound power comes from the supply side, such as low inventories and the low growth rate of global copper production in 2019

however, the author analyzes in detail the use of the anchor fatigue testing machine for global copper production, the functional characteristics of the equipment, and the impact of three major factors, inventory and currency, on the copper price. The conclusion is that the copper market is unlikely to rise on a large scale and with strong sustainability in 2019, but it will rebound periodically and the range will not be too large

first of all, from the perspective of the relationship between the global dominant inventory of copper and the copper price, it was in a de stocking state in 2008, including the global dominant inventory of copper in the copper warehouses of Comex, LME and the last stock exchange of Chicago Mercantile Exchange. After hitting the highest record of 890000 tons since the end of May 2013 on April 4, 2018, it continued to fall. On January 18, 2019, it fell to a low of 323000 tons, which was the lowest record since January 16, 2015

however, statistics show that since October 29, 1999, the correlation between the global dominant copper inventory and the closing price of Shanghai copper active contracts is not high, and the correlation is only -0.47%. Therefore, it is not possible to judge that the copper price will rise sharply by a single indicator of the low global copper inventory

statistics show that since October 29, 1999, there have been five large-scale declines in the global dominant inventory of copper. They are: from March 10, 2000 to December 15, 2000, the highest decline in the global dominant inventory of copper was 51.5%, and Shanghai copper active contracts finally closed up 4.2%; From May 12, 2002 to July 1, 2005, the highest decline in the global copper explicit inventory was 95.3%, and the Shanghai copper active contract finally closed up 109.6%; From February 26, 2010 to September 7, 2012, the highest decline in the global copper explicit inventory was 47.9%, and the Shanghai copper active contract finally closed down 2.6%; From April 26, 2013 to June 14, 2014, the highest decline in the global copper explicit inventory was 72.5%, and the Shanghai copper active contract closed down 4.3%; From April 4, 2018 to January 18, 2019, the highest decline in the global copper explicit inventory was 63.9%, and the Shanghai copper active contract closed down 4.8%

further comparison shows that since October 29, 1999, the global dominant inventory of copper has decreased, and the sharp rise in copper prices needs to meet several conditions: first, the year-on-year growth rate of China's GDP is stable or significantly upward. From the second quarter of 2002 to the third quarter of 2005, the GDP growth rate increased from 8.8% to 11.1%. Second, copper consumption increased rapidly. The bursting of the Internet foam in 2000 led to a certain decline in the growth rate of global copper consumption, with a small increase in copper prices. From 2002 to 2005, China's rapid economic growth was driven by the acceleration of urbanization and industrialization; From 2010 to 2012, China's economic growth peaked and fell, the economy decelerated and shifted gears, and overcapacity was serious; From 2013 to 2014, the economy once rebounded, but industrialization was coming to an end. At the same time, the real estate boom began to fade, and the growth rate of real estate investment fell from more than 20%. Third, the monetary policy of the Central Bank of China is either in the loose period or at the end of the loose period. The year 2000 was in the interest rate reduction cycle from July 1st, 1995 to February 21st, 2002; From May 12, 2002 to July 1, 2005, the central bank raised interest rates for the first time on October 29, 2004, crossing the cycle from monetary easing to tightening, that is, the end of easing; From February 26, 2010 to September 7, 2012, the central bank crossed the monetary tightening and moved towards easing. On June 8, 2012, the central bank cut interest rates for the first time in this round of easing. The period from April 26, 2013 to June 14, 2014 is in the process of a new round of interest rate reduction. Fourth, the growth rate of global copper output has slowed down to a certain extent. According to the data released by the international copper research group (ICSG), the growth rate of global copper output in 2000 was 3.3%, lower than 4. 5% in 1999 After improving the overall competitiveness of the industry, the oil delivery pipe of the oil pump is sent to the oil delivery valve by 4%; The growth rate of global copper production in 2010 was 0.69%, lower than 2.3% in 2009, and the growth rate in 2011 was still low, 0.07%; The growth rate of global copper production rebounded to 8.9% in 2013, but fell sharply to 1.4% in 2014

for the period from April 4, 2018 to January 18, 2019, the global dominant inventory of copper decreased, mainly due to the fact that China's scrap copper policy prohibits the import of "six categories of scrap", resulting in a sharp decline in the substitution consumption of scrap copper for refined copper, and the consumption of refined copper increased, rather than a sharp increase in the total consumption of copper. Combined with GDP growth, monetary policy, global copper supply, global copper inventory decline and other factors, it is concluded that this round of copper price rebound is very limited, and will eventually maintain the decline since the second half of 2018

secondly, as long as there is no negative growth in global copper mines, it is difficult for copper prices to have a substantial gap between supply and demand. In 2019, due to the lack of large-scale copper mine projects in global mines from 2018 to 2019, major global institutions predict that the growth rate of global copper mine production in 2019 is only 1.9%, and the tight supply of copper mine is expected to support the copper price. However, the global copper mine project in 2019 will still bring some increment. The toquepala expansion project under Southern Copper and the Cobre Panama Project of first quantum, which were put into operation at the end of 2018, will increase the copper mine output by 100000 tons and 150000 tons respectively in 2019; The output of Katanga copper mine in Congo under Glencore will resume an increase of 150000 tons in 2019. It is worth noting that since 2004, the negative correlation between global copper production and the closing price of Shanghai copper active contract is very low, only -0.25%; On the contrary, the year-on-year growth rate of global copper production showed a medium positive correlation of 0.5 with the closing price of Shanghai copper active contract

finally, the author believes that the U.S. economy peaked in the fourth quarter of 2018, and the growth rate fell in the first quarter of 2019, which means that the probability of the Federal Reserve raising interest rates in 2019 is very low, the end of the balance sheet contraction process may be earlier than expected, and the dollar exchange rate will weaken. However, from the perspective of the trend of copper prices and the US dollar, the negative correlation between the two is not stable. Copper prices will rise only when the US dollar is weak and the emerging market economy is strong. At present, the emerging market economy has only moderately recovered from the impact of 2018, and there is no potential for a new round of strong growth

in fact, it is consumption weakness that plays a role in suppressing copper prices. No matter in the real estate, automobile and household appliance industries, copper consumption has no potential bright spot. Therefore, the opportunity of the copper market lies in the arbitrage opportunity of buying Comex copper under the influence of volatility and China's tax cuts to sell Shanghai copper and buying Shanghai copper in recent months to sell far months

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