Copper price influencing factors and corporate countermeasures

Introduction: Copper is an important industrial raw material, and its demand is closely related to the economic situation. So, what factors influence the price of copper?

Copper price influencing factors and corporate countermeasures

1, supply and demand relations

According to the principle of microeconomics, when a commodity exceeds demand, its price falls, and vice versa. At the same time, prices will in turn affect supply and demand. That is, when prices rise, supply will increase and demand will decrease. Conversely, there will be an increase in demand and a decrease in supply. This basic principle fully reflects the intrinsic relationship between price and supply and demand.

Changes in inventory are the dominant factors in understanding copper supply. Stock exchanges are more influential on the market: Shanghai Stock Exchange (SHFE), London Metal Exchange (LME) and New York Mercantile Exchange (COMEX) ).

2. Macroeconomics

Copper is an important industrial basic raw material, and changes in its demand are closely related to economic growth. When the economy grows, the demand for copper increases, which in turn drives up the price of copper. When the economy is in recession, the demand for copper shrinks, which in turn causes the price of copper to fall. Under normal circumstances, the market will regard economic growth rates and industrial production growth rates (added value) and related monetary and industrial policies as important analysis basis for changes in the macroeconomic situation.

3, exchange rate fluctuations

Copper is a highly liquid commodity, and in international trade, usually in dollar terms, changes in the exchange rate of non-dollar countries’ native currency to the U.S. dollar will directly affect the cost and profit of copper trade, and in turn, trade. Changes in activities have led to changes in supply and demand, resulting in fluctuations in the price of copper.

two. Response or suggestion

1. Copper processing companies should establish a strategic sales mechanism for the surplus copper volume. Looking at the historical trend of copper prices, we can see that the rise and fall of copper prices is cyclical, while the production of smelters is continuous. As long as the copper smelter metal recovery rate of the smelter is higher than the contract recovery rate, the amount of surplus copper is constantly increasing. Therefore, we can use the law of the cyclical ups and downs of copper prices to timely and reasonably dispose of these surplus copper amounts so as to achieve the purpose of increasing corporate profits.

2. Select appropriate accounting treatment methods to accurately and timely reflect the current profits and losses of copper processing enterprises.

1 The accounting treatment of the final settlement of copper concentrates should be treated differently depending on the specific circumstances of the price cycle and the processing cycle. In order to accurately and timely reflect the current profits and losses of the company, when the final settlement of the copper concentrate is finalized, the adjustments of the final settlement price and the original provisional assessment cost should be treated differently depending on the specific circumstances of the price cycle and the processing cycle. When the copper concentrate's price cycle is greater than the processing cycle, the final settlement adjustment should be directly into operating costs, and then reflected in the current profit and loss; when the copper concentrate's price cycle is less than the processing cycle, the final settlement adjustment should first enter the beginning of raw materials. The cost of inventory is gradually transferred to profit or loss through production costs.

2 The appropriate pricing basis should be selected when conducting inventory tests on inventory. As the copper concentrate purchase and cathode copper sales are generally settled using the monthly average price, the stock price test is selected at the point-in-time price on the last trading day of SHFE. In this way, the accuracy of the measurement of the net realizable value of inventory may be affected, which may affect the impairment loss of assets and ultimately affect the current profits and losses of the enterprise. Therefore, we should choose the appropriate pricing basis for different inventories and reflect the actual value of the inventory assets as accurately as possible.

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