Copper stocks dropped sharply and excess copper prices are weak to change

As the world’s largest copper consumer, copper stocks in the bonded areas of China have declined in recent months, but the copper and copper prices of Shanghai have not been significant.

Standard Chartered Bank recently reported that copper inventories in China's bonded warehouses fell by 63% to 300,000 tons in the four months to July, and the total inventory fell to a level equivalent to three weeks of consumption. Standard Chartered Bank estimates that China’s total copper inventories are about 500,000 tons, with inventory peaking at more than 1 million tons in March.

Excess copper prices are hard to change because of the decline in FED inventories. Standard Chartered Bank analysts believe that Chinese copper users follow the strategy of maintaining low-level stocks because of cautious expectations of orders, modest price outlook, and credit tightening.

However, Standard Chartered Bank also believes that the decline in inventory may provide opportunities for copper prices to rebound around the beginning of October, when demand will experience seasonal improvement. Standard Chartered Bank maintains its forecast of 5% increase in copper consumption in China this year and it expects LME three-month copper prices to be $7,250 per tonne in the third quarter and $7,350 per tonne in the fourth quarter, both higher than the current $7,000. / Ton price level.

According to data from the Shanghai Stock Exchange, stocks in the previous period in early August were around 160,000 tons, a 34% reduction from the record high of 248,000 tons hit on March 28. In addition, from the prices of copper contracts in the previous period, the Shanghai May Exchange's far-month contract still has a premium of several hundred dollars compared to the previous month's contract.

The output of miners is still increasing, but the surplus caused by the increase in output and sluggish demand has become the main reason for bears to pressure the market. The output of copper in the world’s largest copper mine Escondida increased by 28% in fiscal year 2013 as of the end of June due to new mines increasing output and increasing output from existing mines. Anglo American’s copper output in the second quarter also increased by 14%. .

According to statistics from the National Bureau of Statistics, the production of refined copper in June was 568,200 tons, which was basically the same as that of the previous period, with an increase of 10.32% year-on-year. In the first half of this year, the cumulative output of refined copper was 3.234 million tons, a year-on-year increase of 12.84%.

The global copper surplus has not changed. This is also an important reason why prices of Shanghai copper and Lunong copper are difficult to rise.

"Basically, the current market is abundant, and downstream consumption is still weak, and the pattern of oversupply is obvious," said Galaxy.

The weak copper price continued to drag down the profits of miners. At the end of July, the Ministry of Industry and Information Technology announced the list of the first batch of enterprises that eliminated backward production capacity in the industrial sector this year. This year, copper (including recycled copper) plans to eliminate lagging production capacity of 554,400 tons. According to the analysis of Lu Zheng, the global supply surplus is still continuing, and most of the backward production capacity that has been eliminated domestically is no longer used. Therefore, it has little effect on supply.

Throughout July, Shanghai copper prices continued to fluctuate in the range of 48,000 yuan/ton to 50,000 yuan/ton. After entering in August, Shanghai copper's main contract 1311 broke through 50,000 yuan/ton mark in recent days, up from 60,000 yuan at the beginning of the year. Compared with the high price per ton, the decline is still over 15%. A number of analysts told reporters that if more economic data in the later period confirms that the Chinese economy is still slowing further, or that the Fed has revealed that it will end its QE policy ahead of schedule, copper prices will not rule out the possibility of a new low in the year.

Lunbron continued to fluctuate throughout July, and the shock range was maintained at around US$6,800/t to US$7,000/t. After entering the month of August, it broke through the $7,000/ton price threshold, which is close to 15% compared to the high of $8,200/ton at the beginning of the year.

Copper is closely related to the prosperity of the manufacturing industry. Under the background of the uncertain global economic outlook, domestic and international copper prices are unlikely to continue rising.

Since the beginning of this year, the weak copper price has also dragged down the profits of copper mining companies. Although Jiangxi Copper achieved an operating income of 46 billion yuan in the first quarter of this year, a year-on-year increase of 60%, the net profit attributable to shareholders of listed companies was 970 million yuan, a year-on-year drop of 32%. .

In the second quarter of this year, copper prices were worse than the first quarter. Jiangxi Copper believes that due to the significant drop in LME and SHFE copper prices from January to April of this year, if the copper prices remain at current prices or continue to decline during the rest of the second quarter, the company expects to accumulate net profit in the first half of 2013 Year-on-year decline of more than 50%.

In addition, Yunnan Copper expects the net profit attributable to shareholders of listed companies to lose between RMB 800 million and RMB 850 million in 2013; Zijin Mining also expects the net profit attributable to shareholders of listed companies to decline in the third half of 2013 as compared with the same period of last year. 45%~55%.

A non-ferrous metal industry analyst told reporters: "For domestic copper mining companies, the decline in copper prices is the main reason for the decline in self-produced mine profits. For the entire 2013, the provision of inventory depreciation caused by the decline in copper prices It is also an important cause of erosion of profits."