Trend analysis

On February 25, spot copper continued to soar. Spot copper broke 70,000 yuan, quoting 70,111.67 yuan/ton, up 2.86% from the previous trading day, up 20.98% from the beginning of the year, and up 54.03% year-on-year.

Macro exceed expectations

Macro factors exceeded expectations and major economies recovered. Due to the smooth advancement of the vaccine, the overseas economy has entered a stage of accelerated recovery; under the easing of foreign currency and finance, inflation is stronger than expected; Biden advocates 'multilateralism' and uses fast-track procedures to vigorously promote the US$1.9 trillion fiscal stimulus, and the scale of fiscal stimulus will be increased. Far exceeding market expectations, the global political and economic environment is improving.

Copper disturbance

Before the Spring Festival, the Peruvian epidemic situation caused land traffic in some mining areas to be blocked, and the severe weather in Chile caused some ports to be unable to load and unload. The supply of concentrate was disturbed, and the TC dropped to about US$40. Recently, the weather in Chile has improved, but the port concentrate inventory is still at a low level, and TC repair is slow.

Low global refined copper inventory

The dominant global inventory of refined copper (LME+COMEX+SHFE+ Free Trade Zone) is still at the low level in the past five years.

About 70% of the new production is concentrated in the second half of the year

The new output in 2021 may be mainly concentrated in the second half of the year, and the new output in the first half of the year: the second half = 3:7. In 2021, the newly-built mines will be put into operation and the old mine's technological transformation and expansion projects will add about 599,000 tons of copper However, the Chilean National Copper Corporation and BHP Billiton have reduced their forecasted output due to aging mines and declining ore grades. Therefore, the total global copper output in 2021 is expected to increase by 422,000 tons compared to 2020. According to the calculation of the progress of the newly-built mine, the increase in the output of mineral copper in the first half of 2021 is about 201,000 tons, and the increase in the output of mineral copper in the second half of the year is about 398,000 tons. The increase in output in the first half of the year: the second half = 3:7, new The increase in production is mainly concentrated in the second half of 2021.

Copper prices usher in a strong market like 2011

According to data from SunSirs, the spot copper price hit a new high in the past ten years, and the price is equivalent to the copper price level from January to August 2011. Historically, the 2009 financial crisis hit the global economy severely, and the global GDP growth rate fell to the bottom, while the global refined copper output growth rate was only -1.67%. The subsequent 2010-2011 global quantitative easing and economic stimulus plans promoted a strong economic recovery and drove copper prices to reach historical highs in 2011. Correspondingly, the global GDP growth rate in 2020 will be hit by health incidents or hit a record low, while the global refined copper output growth rate is also hovering around 0%. However, with the promotion of vaccine research and development and the global economic stimulus plan, the global economy has ushered in a strong recovery, and the copper price has ushered in a strong rise as in 2011.

High breakthrough space may be limited

The resumption of work in scrap copper enterprises this week may ease the tight copper supply to a certain extent. The recent increase in copper prices may have been a bit too high, reaching the high price level in 2011. The highest copper price in 2011 was about 75,000 yuan/ton, and there is limited room for continued breakthroughs.

In summary, there will be a record gap in the refined copper market, the global green wave, the development of new energy vehicles and other industries, the outlook for copper concentrate supply is still pessimistic, the macro-loose environment also provides support, and copper prices continue to rise. With the resumption of work after the Spring Festival, increased demand, and the recovery of overseas economies, copper prices remain strong. However, it is good for consumption, which has reached a high in the past ten years, and the motivation to continue to climb is insufficient. It is expected that the short-term high-level fluctuation of copper prices will be the main trend.

Related listed companies: Jiangxi Copper (600362), Tongling Nonferrous Metals (000630), Yunnan Copper (000878).

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