The price of copper is expected to rise to a new level after a high level of consolidation!

Shanghai copper rose sharply by 2.9% on Monday and it has broken through the consolidation range since October 11, but the pressure on copper prices has gradually increased after entering the 64,000 yuan/ton mark. Insufficient discounts in the spot market continued to increase and the willingness to go up, the slowdown in the decline of London copper stocks, Shanghai copper stocks rebounded for 3 weeks in a row, while the demand constraints are also increasing. From the point of view of global economic growth, the expected value of economic growth between the EU and the United States has a certain upward adjustment compared to the end of last year, but it has remained at a relatively low level. The fall of China’s economic growth rate on a quarter-by-quarter basis also shows a slowdown in total domestic demand. . The author believes that the main factor supporting the new high of copper price is still the expectation of the Fed to further implement the loose monetary policy. Since the inflation rate in the United States has not exceeded 2%, the price of copper will continue to fluctuate upward before the Fed raises interest rates for the first time. Short-term adjustments will not change the long-term trend.

Demand has slowed down. The price of copper has fallen back on domestic spot. After experiencing a high rise in May-July, over the past two months, premium has become the norm, and Shanghai Copper has been expanding its premium since reaching its highest level during the year, and traders have expanded their discounts. To drive a deal. Taking the Shanghai market as an example, the pattern of the morning market on October 26th continued to expand at the discounted premium level on the afternoon of the 25th, and flat water copper discounted to 650-700 yuan/t, which is a rare year since the beginning of the year. Downstream manufacturers face a high fear of high prices of copper prices of more than RMB 63,000/t. They basically purchase on-demand, and the spot market transactions are relatively light. The downturn in the spot market has a background in end demand. For domestic use of copper, copper wire (for power, construction) accounts for 55% of the total copper, copper strips (electronics, automobiles, electricity) account for 16%, copper tubes (appliances, buildings) account for 13%, copper rods (Building, hardware, light industry) accounted for 12%, and copper foil accounted for 2%. The above terminal demand has been decelerating in different degrees since the second half of the year.
While terminal demand is slowing down, import data also shows some changes in demand. According to data released by the General Administration of Customs on Monday, China’s refined copper imports in September decreased by 15% year-on-year to 241,711t. China’s refined copper imports in September fell 9.5% from 267,153t in August. From January to September, China imported 2.29 million tons of refined copper, a year-on-year decrease of 11%. In the third quarter, copper demand entered the peak season, while import data showed a downward trend year-on-year and quarter-to-quarter, and import data reflected the slowdown in terminal demand to some extent.
Judging from the dominant stocks in the future, Lonco copper stocks have continued to decline since the beginning of the year, but the reduction in average daily inventories has been reduced to less than 1000 tons since late September. Shanghai copper stocks last Friday was 106,275t, which increased for three consecutive weeks. The slowdown in the apparent inventory decline shows that the demand has slowed down widely since the third quarter.
The slowdown in demand from the terminal will inhibit the enthusiasm of the downstream manufacturers in purchasing, making the spot drop gradually expand, and eventually lead to the market, which will make the Shanghai copper slowdown.

Long-term support for economic recovery After experiencing the European debt crisis this year, the global economy has entered a period of relative ease. Although it was a matter of trouble, economic growth in various countries could hardly find a growth pole and form an engine effect, but the slow recovery of the global economy was an indisputable fact. The gradual improvement of the economy will help increase the total demand and stimulate the demand for copper. In addition, one of the signs of economic recovery is the beginning of expansion of capital expenditures. In the near term, capital expenditures in the United States have continued to expand, and capital goods have been gradually depleted during the economic crisis. The renewal of fixed assets and machinery and equipment by business owners will stimulate the expansion of the manufacturing industry and drive up employment. This will create a flourishing investment and consumption mutual activation.
In the near future, although the economic data of the United States and Europe are mixed, they are still focusing on continuous stabilization. It is understood that the savings rate of the U.S. residents has risen to a high level in the past decade, and that the slow growth of the U.S. economy is more sustainable. The increase in the saving rate also contributes to the reduction of the U.S. trade deficit. In Europe, the growth rate in Germany in the second quarter was 1%, which is expected to slow in the fourth quarter. In the long run, it is worth noting that the fiscal deficits of the EU countries will return to the framework of the Economic Growth and Stability Pact, and at the same time reform the social welfare system, and their long-term growth will continue to be very good. While the developed economies in Europe and the United States have grown slowly, emerging economies have performed even better. China's growth rate for the third consecutive quarter was above 10%, India's growth rate was 8.8% in the second quarter, and it maintained a growth rate of more than 8% for the full year. Although the slow growth of the global economy can hardly exert a powerful boost to copper prices in the short term, the long-term and stable growth is indeed a fundamental factor in the firmness of copper prices. At present, the economic recovery will form long-term support for copper prices.

Liquidity accelerated flooding boosted copper prices Currently, the US federal ** interest rate is maintained at 0-0.25%. This extreme interest rate never appeared in the postwar 60 years. It is close to that in 1954, except for the sharp correction of benchmark interest rates in individual months. To 0.25%, the US benchmark interest rate for the entire 1950s fluctuated between 2% and 3%, and its ceiling did not exceed 4%. The stagflation in the 1970s forced the Fed to raise its benchmark interest rate from about 4.5% in 1971 to 22% in December 31, 1980. Economic growth experienced severe turmoil. In recent years, the currency factor has attracted people's attention. Lun Copper reached a record high in 2006, in which the contribution of the depreciation of the US dollar reached more than 50%. In addition to the recovery in the demand level, the weaker U.S. dollar index is the most significant factor in the increase in the base metals since the beginning of 2009.
On October 25, the U.S. Department of the Treasury issued a total of 10 billion U.S. dollars worth of inflation-preserved treasury bonds. The final successful yields on these treasury bonds were as low as only negative 0.55%. This is the first time in the history of the United States that inflation has occurred. The rate of return on the hedged bonds is reduced to negative. On November 2-3, the Fed will hold another monetary policy meeting. The unemployment rate in the United States remains high and is still at 9.6%. The core inflation rate is 1%, which is only half of the Fed’s policy target of 2%. As a result, the U.S. central bank is currently considering implementing a new round of asset purchase stimulus, namely quantitative easing.
At this stage, employment and exports in the United States remain in dangerous areas, and economic growth is slow. The Fed’s further loosening of the currency will quickly become a reality. Since June of this year, the U.S. dollar has depreciated by more than 10% against major currencies such as the euro and the yen, causing a new wave of currency devaluation. After the "911" incident in 2001, the Fed’s easing policy caused the US dollar index to fall from 120 to 80, while the London copper rose from 2,000 US dollars/t to above 8,000 US dollars/ton. This round of currency devaluation not only surpassed 2001, but also far surpassed any period in the history of the United States, and its impact on the global economy will also be even more fierce. On the basis of an already very loose monetary supply in the early period, the currency has once again accelerated its devaluation, and the base metals are expected to rise again after the current high level has been consolidated.

The market outlook is expected to Shanghai copper in the 65,000 yuan / t integer mark start callback, showing that 64000-66000 yuan / t line pressure can not be overlooked, in fact, since late September since the Shanghai copper and London copper ratio has remained low, once dropped to 7.3, outside The pattern of strong internal weakness is very obvious. Recently, the ratio has been repaired, but Shanghai Copper's breakthrough of 64,000-66,000 yuan/t still requires the guidance of major incidents. The author believes that the main factor supporting the rise in copper prices is the devaluation of the global currency, led by the US dollar, as the demand side continues to weaken. The market is generally concerned about the Federal Reserve meeting on interest rates in early November and it is expected that the pattern of accelerated liquidity will be emerging. Recently, the Shanghai copper adjustment is an amendment to the rapid increase in the previous period, does not change its stubborn upside trend. In the process of Shanghai copper consolidation callback, it is necessary to pay close attention to the progress of the Seoul G20 summit and the performance of the recent US dollar index.