Both supply and demand are weak, and copper prices in February showed an inverted “N” trend

1、 Trend analysis


According to monitoring data from Business Society, copper prices in February showed an inverted “N” – shaped trend. At the beginning of the month, the copper price was 69131.67 yuan/ton. At the end of the month, the copper price dropped to 68715 yuan/ton, with an overall decline of 0.6% and a year-on-year increase of 0.36%.


According to the current chart of the Business Society, copper spot prices in February were generally higher than futures prices, and the main contract was the expected price in two months. The overall future copper price is bearish.


According to LME inventory, LME copper inventory slightly decreased in February. As of the end of the month, LME copper inventory was 126525 yuan/ton, a decrease of 12.99% compared to the beginning of the month.


Macroscopically, the minutes of the Federal Reserve meeting indicate that it is unlikely that the Fed will cut interest rates soon, and market focus is shifting towards the upcoming release of US inflation data. On the domestic side, the LPR significantly decreased by 25 basis points in the first week after the holiday, marking the most aggressive rate cut in history, releasing strong market signals and injecting great confidence into the market. In addition, multiple regions have released a “whitelist” of real estate projects, and multiple banks have quickly provided new financing and loan extensions, boosting the sluggish real estate market.


On the supply side


The disturbance at the offshore mining end has not yet subsided, and market concerns about the mining end continue. The closure of Cobre copper mine until May 2024 has affected production by approximately 175000 tons; The Sossego copper mine has suspended operations, further impacting copper mine supply. The decrease in spot processing fees for copper concentrate may affect the domestic supply of refined copper at the end of the first quarter, and have a negative impact on the spot and long-term contract signing of copper concentrate.


Downstream aspect


After the end of the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival) Festival, the consumption verification stage has basically entered. At present, the situation of new energy vehicles and air conditioners remains resilient, but the infrastructure and real estate sectors are still weak, and the overall demand is estimated to be relatively neutral. The spot market transactions remain sluggish, and the downstream procurement frenzy has not yet begun. Most companies are still consuming their pre Spring Festival stock of raw materials and long order supply, and some market participants are only maintaining a low price to purchase goods. Overall, consumer sentiment is poor, which suppresses market trading activity.


Comparison chart of annual copper prices


According to the annual price comparison chart of copper, in the past five years, except for the decline in copper prices in March 2020 due to the epidemic, copper prices in March of other years have been relatively strong.


Overall, due to the Spring Festival, copper trading in China has stagnated and inventory has slightly accumulated. After the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival), with the recovery of downstream demand, copper prices are supported by the disturbance of copper mines. At the same time, the release of favorable policies in China will continuously enhance investor confidence. However, macro uncertainty factors still exist, and it is expected that copper prices will experience strong fluctuations in March.

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