1、 Trend analysis
Copper prices have slightly decreased this week. As of August 21st, the copper price was reported at 107893.33 yuan/ton, a decrease of 1.79% from the beginning of the week and a year-on-year increase of 36.93%.
LME copper inventory
According to data released by the London Metal Exchange (LME). LME copper inventory has slightly increased, with 239925 tons of LME copper inventory as of the weekend, up 15.45% from the beginning of the week.
Macroscopically, the US CPI rose by 3.4% year-on-year in July, while the core CPI slowed down to 2.5%; PPI rose 4.7% year-on-year, lower than expected. Inflation continues to cool down, coupled with lower than expected non farm employment, the market’s pricing for the Federal Reserve’s September interest rate hike has dropped to around 35%, and the US dollar index has fallen to the 99th level, ushering in a valuation repair window for commodities. But the minutes of the Federal Reserve’s July meeting released a hawkish signal, with long-term US bond yields rising again and geopolitical risks continuing to suppress risk appetite.
Supply side: Global copper mine supply contraction intensifies, with Chile’s copper production in the first half of the year decreasing by 6.7% year-on-year and Peru’s copper production in June decreasing by 4.7% year-on-year. This week, Las Bambas mine was temporarily shut down due to an accident, and Caserones mine’s recovery was hindered by a snowstorm. BHP has lowered its production guidance. Copper concentrate TC has fallen to a historical low of -175.37 US dollars per dry ton, making it difficult to alleviate the short-term shortage situation in the mining sector.
On the demand side: Currently in the off-season of consumption, high copper prices significantly suppress downstream purchasing intentions, and market transactions are mainly driven by essential needs. The domestic spot price has changed from a premium of 80 yuan/ton to a discount of 170 yuan/ton. The operating rate of copper cable enterprises is 65.8%, a year-on-year decrease of 3.08 percentage points. The operating rate of refined copper is still weak year-on-year, and the overall consumption in traditional fields is weak.
Influencing factors:
Positive factors: cooling inflation in the United States, falling expectations of interest rate hikes, weakening of the US dollar, and improvement in macroeconomic sentiment; The long-term contradiction of insufficient capital expenditure in global copper mines persists, with deep negative TC values, making it difficult to alleviate the shortage at the mining end; COMEX and LME inventories are severely differentiated, putting pressure on spot liquidity in non US regions; The peak season of “Golden September and Silver October” is approaching, and the demand for new energy and other fields continues to grow.
Negative factors: LME inventory is rapidly recovering, squeezing sentiment is easing, and copper prices are being suppressed; Traditional consumption is suppressed by high prices during the off-season, and downstream purchasing intentions are insufficient, resulting in the continuation of the spot discount pattern; The Federal Reserve’s policy expectations are fluctuating, long-term bond yields are rising, and geopolitical risks persist; The US tariff policy is currently the biggest variable, and its implementation may trigger a “win-win” adjustment.
In summary, copper prices have surged and fallen this week, putting pressure on LME as it approaches historical highs. On the macro level, the cooling of inflation and the expected decline in interest rate hikes provide support, but long-term bond rates and geopolitical risks suppress sentiment. The shortage of mining resources has not changed, but LME inventory has rebounded to alleviate the pressure of short selling; The demand side is weak overall due to the combination of low season and high price suppression. The core contradiction – supply constraints at the mining end and structural mismatch of inventory – has not undergone fundamental changes.
In the short term, LME inventory continues to rise and the squeeze sentiment eases, putting pressure on copper prices to fluctuate and adjust. However, the mining sector is tight and TC continues to weaken, coupled with the support of the expected peak consumption season, there may not be much room for adjustment. In the medium to long term, the logic of insufficient capital expenditure and expansion of emerging demand in copper mines still holds true.
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