A new round of quantitative policies to restart the supply of copper tight copper prices rose

Following the Fed’s resumption of its quantitative easing monetary policy, the Japanese government also announced a large-scale stimulus plan on August 30th. The new round of quantitative easing policies in the world is ready to come. With such a large-scale easing of funds, it is expected that the upward trend of copper prices will continue, and even the possibility of breaking the previous highs may not be ruled out.

The new round of quantitative easing policy restart

The Fed issued a statement on August 10 that it will continue to maintain the benchmark interest rate unchanged at 0%-0.25%. At the same time, it also decided to re-invest institutional debt and MBS held by it for the purchase of government bonds. This marks a 180-degree shift in the attitude of the Fed, which means the resumption of a new round of quantitative easing.

Japan also began to take action to support its fragile economic recovery: the Bank of Japan announced a 6-month cheaper gambling increase of 10 trillion yen, and the government announced a 920 billion yen stimulus package.

At the meeting of the world’s central bankers’ monetary policy symposium, when talking about the Fed’s follow-up monetary policy, Fed ** Bernanke believes that maintaining price stability is the Fed’s first goal, and at the same time it puts forward four unconventional policies for post-money policy operations. tool.

Based on the analysis of the current economic situation in the United States, we believe that in the short term, the Fed may still adopt a form of monetary policy control called "asset portfolio control." That is to say, the Fed puts in money through the purchase of bonds of different durations, indirectly intervenes in the real economy, and stimulates private investment demand. On the one hand, the Fed's purchase of long-term Treasury bonds will depress the yield of long-term Treasury bonds, thus creating a low-interest policy environment for the economy and reducing the investment costs of private investors; on the other hand, the Fed’s purchase of short-term Treasury bonds will directly affect private individuals. Investor's portfolio. The Fed’s purchase of short-term national debt will reduce its yield, thereby changing the risk preference of private investors and prompting funds to flow from markets with lower risks to markets with higher risks.

In the long term, we believe that if the U.S. economy remains in a downturn in 2010, the Fed will increase its money supply in the later period and continue to expand its balance sheet. As the Fed’s monetary policy operation has a vane effect on the rest of the world’s central banks, we expect that the global central bank will enter the second round of loosening in the latter part of the period. The abundance of funds will provide sufficient momentum for the rise of copper prices.

The tight supply situation in the copper market gradually emerged

From a fundamental point of view, the increase in consumer demand from China has changed the fundamentals of copper, and the tight supply of copper has gradually emerged.

The International Copper Research Institute released an August report that the world's refined copper production in the world was in short supply of 93,000 tons in May; the output of refined copper in the January-May period was 190,000 tons (up from seasonally adjusted excess supply of 46,000 tons). There was a surplus of 0.8 million tons in the same period of the year (a seasonal surplus of 223,000 tons). From January to May 2010, the consumption of refined copper in the world increased by 7.4% year-on-year, which was mainly driven by the recovery of consumption in Japan, the European Union and the United States, and the 5% increase in China’s apparent consumption. From January to May, the global apparent consumption of refined copper increased 8.4% year-on-year (ie, 620,000 tons). Consumption in China, the European Union, Japan and the United States rose by 3.6%, 11.5%, 37% and 4.5% respectively. Despite the increase in production capacity, the supply of copper from January to May remained tight. From January to May 2010, the global copper production increased by only 0.3% year-on-year. Chile’s copper production in the world’s largest copper producer increased slightly by 1.8% year-on-year, while output of other major copper producers decreased by 7.5%. Copper mining capacity utilization fell to 77.5%.

On the one hand, there is ample liquidity on the one hand, and the other on the other hand is the fundamentals of tight supply. We believe that the trend of copper in the latter period will continue to be the main trend. Shanghai copper prices have created a new high since May this year. Driven by the two factors mentioned above, we believe that the future price of Shanghai copper may exceed the previous high in April.