Dr. Bronze VS Black Gold: Can You Stage the "Turtle and Rabbit Race"

The same is the commodity, this side of the box, the black system of the market is in full swing, bullish carnival, new highs and new highs; that side of the box, non-ferrous but like the fight of trapped beasts, long and short entanglement, shock and shock.

Looking back at the trend since the beginning of the year, black threads, iron ore, coking coal, and coke have risen in turn since the beginning of the year, and some varieties have risen by more than 200% year-to-date. The Shanghai copper price rose by less than 5% in the same period, and the LME copper price closed at 4689 US dollars / ton at the end of last year, and the latest quotation is 4691 US dollars / ton, almost zero increase.

Also in the gold nine silver ten, can the copper price replicate the success of the black system? Analysts pointed out that the black market is brought about by supply-side reforms and is a unique variety in China, while copper is determined by global fundamentals, and the dominant factors of the two are different. Copper prices continue to have greater downward pressure, and copper prices may test previous lows in the fourth quarter.

Black Carnival Colored loneliness

Also in the "golden nine silver ten", but while the black market such as coking coal and coke is in full swing, the non-ferrous metals represented by copper have become a lonely boat. Shanghai copper has recently soared and fallen, falling more than 2% since October 12.

"The recent surge in declines, on the one hand, is dampened by the strengthening of the US dollar index, and on the other hand, the market has intensified its fundamental concerns, which we believe include both concerns about the growth of refined copper production and concerns about the decline in terminal demand in the fourth quarter." Topix Futures analyst Cao Yang pointed out.

According to the data, as of October 14, the dominant inventory of the three major exchanges was 535,000 tons, an increase of 8,587 tons week-on-week, and the inventory of domestic bonded areas was 510,000 tons, an increase of about 20,000 tons week-on-week.

From January to September, China's cumulative imports of unforgought copper and copper materials were 3.79 million tons, an increase of 11.8% year-on-year; imports in September were 340,000 tons, down 26.1% year-on-year. The sharp drop in imports in September also caused concerns about china's copper demand.

On the news side, Europe's largest copper smelter Aurubis sharply reduced the refined copper premium in the European market next year, which was interpreted by the market as a signal of continued weakness in the copper market, and we are more worried that with the rise of domestic copper exports, the competition between domestic and foreign smelters will be more intense, and the bidding may further suppress copper prices.

"China's export data is unexpectedly weak, commodities are giving up the rally, copper prices have not yet been fastened above the 38,000 yuan / ton line, and they have been pulled out of the car." Coupled with the Fed's remarks about raising interest rates at least once a year, most investors have chosen to sell goods and wait and see. Zhuo Chuang information analyst Sun Kewen pointed out.

Looking back at the trend since the beginning of the year, statistics show that black threads, iron ore, coking coal, and coke have risen in turn since the beginning of the year, and some varieties have risen by more than 200% year-to-date. While shanghai copper prices rose less than 5% in the same period, LME copper prices closed at $4689 at the end of last year, and the latest $4691 is now , almost zero gains.

"The black market is brought about by supply-side reforms and is a unique variety in China, while copper is determined by global fundamentals, and the dominant factors of the two are different." Che Hongyun, chief nonferrous analyst of SDIC Anxin Futures, said.

Wu Jiang, an analyst at Founder Medium-term Futures, said that the main difference between the supply and demand level of the two is huge. On the demand side, the rise in house prices in the first half of the year, the main benefit is in the black series, real estate can basically cover most of the demand for rebar. Relatively speaking, the demand for non-ferrous metals industry performance is decent, especially copper is an international variety, and the demand performance of other countries will also have a great impact. At the supply level, copper is oversupplied during the year, especially the serious surplus of upstream copper mines, which makes copper prices rebound to a certain extent and will encounter upstream selling pressure.

"The supply-side reform eliminates backward production capacity from the supply side, and the steel industry has the greatest implementation and the most obvious production reduction effect." After the large-scale de-capacity of the steel industry, some varieties such as coal coke even appeared in short supply, resulting in a continuous rise in prices. At the same time, the black varieties are not closely linked with foreign countries, most varieties have no foreign futures, only spot quotations, and the closedness of supply-side reform has led to a large increase in domestic affected varieties. Copper resources are mainly in foreign countries, there are many exchanges and trade chains in the world, price competition and trade processes are very transparent, affected by the overall global supply, and relatively little affected by domestic policies, so copper performance is not as smooth as black. Liu Chao, an analyst at BOCI Futures, added.

Production Increase: The Sword of Damocles hanging above the price of copper

"The fundamentals of copper this year are excess. Copper prices rebounded in September because of the peak consumption season, and China's low copper inventories also played a key role. But into mid-October, especially from last week, domestic copper inventories began to increase, and in addition, seasonally speaking, the peak season was nearing the end, and the support factors in September changed, which increased the pressure on copper prices to fall. Che Hongyun said.

Copper mine production capacity production still maintained a rapid growth rate. According to the ICSG report, global copper ore production increased by 3.82% in June, and the ICSG mine production forecast report shows that from 2015 to 2019, the average annual output growth rate of global mines will reach 4.1%. Global copper mines cost $3,986/mt in the second quarter, down 14 percent year-over-year, down $4,057 in the first quarter and $4,462 in the fourth quarter of last year. Since the fourth quarter of last year, some high-cost mines have cut and closed production, reduced cash expenditures and effective cost management, which have played a role in the face of falling copper prices.

At the same time, the strength of the US dollar also makes it cheaper to produce ore in local currency. According to the second quarter report of major mines, Glencore's mine costs fell by 25.37% in the second quarter, and production fell by 8.7%, which was lower than the 400,000 tons of production reduction announced last year. Although there are still some mines that reduce production and reduce costs, but more is the increase in mine production, the current situation of rapid growth in the total supply of copper ore has not changed, which can be reflected in the fact that copper processing fees have remained above $100.

"The world's three copper exchanges have a total inventory of 532,000 tons, and the inventory is in the high range of the normal range. From the perspective of supply and demand fundamentals combined with inventories, the supply and demand of the global copper market are in a tight balance, and the expectation of excess supply of concentrates still puts pressure on the market. Liu Chao said.

Cao Yang said that there is still a tendency to intensify the excess supply and demand, which will inevitably lead to the total inventory continue to show a growth trend, although the financing demand for copper, trade demand, and even including the restocking demand in the middle and lower reaches of the river make this growth invisible, but once the demand is expected to be disappointed, this batch of inventory is easy to be manifested, thus suppressing copper prices. As of the end of last week, the recovery in both domestic bonded areas and inventories in the previous period may be the initial reaction to this situation.

Specifically, Cao Yang pointed out that on the supply side, the rapid expansion of global copper mines has led to an increase in processing fees, the profits of the midstream smelting link have increased, and the utilization rate of equipment has remained at a high level, and the logic of increasing production in this piece is difficult to change in the short term. At present, the release of recycled copper production capacity has been limited to a certain extent, mainly due to the tightness of scrap copper raw materials, but on the whole, this increase and decrease, the increase is greater than the reduction, and the domestic copper supply growth rate is expected to remain above 3%. On the demand side, the demand of the home appliance industry is only a stage of recovery, the demand for the transportation industry is limited, the demand for the power industry continues to be sluggish, and the domestic terminal copper demand in the fourth quarter is likely to decline steadily.

The "cold winter" of copper prices is coming

"In the future, the market will focus on whether China's copper terminal demand can continue to exert efforts, so as to digest the global excess concentrate energy." Liu Chao pointed out.

China's copper terminal consumption is mainly concentrated in the fields of wire and cable, power equipment manufacturing, substation equipment manufacturing, automobile and transportation, air conditioning, machinery, electronics and ships.

According to the analysis of terminal data, Liu Chao believes that the actual growth rate of terminal copper consumption in China from January to July this year is less than 3%. The areas of increase in consumption are mainly wire and cable, with a growth rate of more than 3%, and the areas where consumption declines are air conditioners and automobiles. The probability of marginal contraction of China's money supply in the fourth quarter is larger, the Fed is expected to raise interest rates in December, and the overall internal and external environment is expected to be not optimistic in the fourth quarter, the possibility of a significant increase in terminal consumption is unlikely, and the probability of weak copper price shocks is larger.

"As can be seen from the recent processing fees around $105, the supply of copper in 2016 is still excessive, but we believe that the most surplus time for copper is passing." Wu Jiang analyzed.

Wu Jiang said that due to low copper prices, Chile, the world's largest copper miner, is shrinking investment, and the country's copper production is expected to decline by 5% this year, and this situation continues to develop. In the first half of this year, the growth rate of copper minerals in Peru was maintained at 50%, but this increase has also reached its limit, and it is difficult to maintain such an increase in the future.

From the perspective of inventory, Wu Jiang believes that in August this year, LME inventory experienced a rapid upward process, mainly due to the increase in domestic production and the reduction of imports, but from the current trade rise and import profit and loss, copper imports in October will have a significant improvement, and the probability of future decline in copper inventories is large.

From the perspective of refined copper supply and demand, Wu Jiang said that the supply of high processing fees is still stimulating the production of domestic smelting, in the first half of this year due to domestic smelter production cuts, maintenance, etc., smelting output is in a short-term state of suppression, but the second half of the year began to significantly increase domestic production, August domestic copper production year-on-year growth rate returned to double digits for the first time in the year, it is expected that September, October copper production will also maintain a high level.

"The most worth mentioning is the demand side, the latest data air conditioning, electricity, wire and cable and other industries in the second half of the year significantly increased." According to the World Bureau of Metals Statistics, copper supply and demand in the first half of this year was much better than expected, on this basis, we believe that the increase in supply and demand in the second half of the year will expand, and the demand growth rate may be higher than the increase in supply. Wu Jiang said that the follow-up copper market to see the rebound, the logic is the embodiment of China's consumption endogenous growth, demand growth is better than expected, supply smelting is difficult to further expand in the short term, China's copper imports will improve. Domestic copper prices look at the range of 39,000-40,000 yuan / ton, and LME copper sees $5,100.

In the medium and long term, Cao Yang believes that the pressure on copper prices to continue to decline is greater, copper prices may test the previous lows, the most basic logic is still in the suppression of macroscopic and fundamental deterioration, the time point is judged to be the fourth quarter. On the one hand, considering the problem of the Fed's interest rate hike, on the other hand, the fourth quarter economic data comes out, which may falsify the current demand improvement expectations. However, the short-term market may have to consider more about the disturbance of the capital side, especially after the real estate regulation, if the speculative funds flowing out of real estate enter the commodity market, it may form a certain bullish atmosphere, which will drive copper prices up, but even so, copper is difficult to get out of the black trend, high inventory and high imports will limit the pursuit of funds copper.