1、 Trend analysis
According to monitoring data from Business Society, copper prices fluctuated and fell in October, with a slight increase at the end of the month. At the beginning of the month, the copper price was 67496.67 yuan/ton, but at the end of the month, the copper price fell to 66900 yuan/ton, with an overall decrease of 0.88% and a year-on-year increase of 4.58%.
According to the current chart of the Business Society, the spot price of copper in October is generally higher than the futures price, and the main contract is the expected price in two months. Copper in October is generally bearish.
According to LME inventory, LME copper inventory continued to rise significantly in October, reaching a new high of 190000 tons in over two years, with a slight decline in inventory at the end of the month.
Macroscopically, Federal Reserve Chairman Powell stated that the strong performance of the US economy and the continued tension in the labor market may require further tightening of borrowing conditions to control inflation. Rising yields will help further tighten financial conditions, which may “to some extent” reduce the need for further interest rate hikes by the Federal Reserve. Investors are further inclined to bet that the Federal Reserve has completed this round of interest rate hikes. However, under the influence of strong economic data and the escalating Israeli-Palestinian conflict, US bond yields have continued to rise, with the 10-year US bond yield breaking through 5% at the end of the month for the first time since 2007.
High supply growth
This year, the supply of copper concentrate is sufficient, with high growth rates in Peru and the Democratic Republic of Congo. From January to August this year, the supply of copper ore in Peru increased by 17.83%, while the supply of copper ore in Chile decreased slightly by 2.2%. From January to July, the supply of copper ore in the Democratic Republic of Congo increased by 10.56%. The expected growth rate of copper concentrate supply in the fourth quarter is 3.8%. The domestic supply of refined copper has grown rapidly and has reached a historic high. In September, the production of refined copper reached 1.01 million tons, continuing to reach a new high, an increase of 11.3% compared to last year. The import volume of refined copper has also rebounded to 340000 tons, and countries such as the Democratic Republic of Congo and Serbia have increased their imports of copper.
Downstream aspect
Real estate: Since August, the government has introduced a series of policies to promote real estate consumption. However, the actual effect is average. In September, the sales area of commercial housing decreased by 19.76% year-on-year, and the transaction area of 100 cities’ land continued to weaken.
Air conditioning: According to the latest monthly report on the production and sales of household air conditioners, 9.693 million units were produced in September 2023, a year-on-year decrease of 5.9%; Sales of 9.989 million units decreased by 5.3% year-on-year. Among them, 5.681 million units were shipped domestically, a year-on-year decrease of 20.1%; Export 4.308 million units, a year-on-year increase of 25.3%. In September, the air conditioning production of key enterprises decreased by 4.4% year-on-year, and domestic sales continued to weaken, but exports remained positive.
Automobiles: According to the latest data from the China Automobile Association, the production and sales of automobiles reached 2.85 million and 2.858 million units respectively in September 2023, with year-on-year growth of 6.6% and 9.5%, respectively. Both production and sales reached historical highs during the same period; From January to September, the cumulative production and sales of automobiles reached 21.075 million and 21.069 million, with year-on-year growth of 7.3% and 8.2%, respectively. According to data from the China Automobile Association, the production and sales of new energy vehicles in September reached 879000 and 904000, respectively, with year-on-year growth of 16.1% and 27.7%, and a market share of 31.6%.
Power grid investment: From January to August, the completed investment in power grid projects was 270.5 billion yuan, a year-on-year increase of 1.4%. In August, the completed investment in power grid projects was 23.2 billion yuan, a year-on-year decrease of 45.79%.
According to the comparison chart of annual copper prices, in the past five years, copper prices have risen and fallen by half in November.
Based on the above situation, the macro environment of the market is relatively pessimistic, and the geopolitical crisis poses pressure on global stock markets and non-ferrous metals. Fundamentally speaking, the domestic supply is high in the fourth quarter, and the expectation of overseas imports is also strong. Although the fourth quarter is the peak season for consumption, the overall situation is “not prosperous during the peak season”. It is expected that copper prices will still struggle to improve in November, with low volatility being the main trend.
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