What is the specific analysis of the copper market under the precise investment of the State Reserve?
Since the beginning of this year, due to the combined influence of various factors, the prices of some commodities have continued to rise, and copper prices once hit a record high. In accordance with the arrangements of the State Council executive meeting to ensure supply and stable prices of bulk commodities, the State Administration of Grain and Material Reserves released the national reserve of non-ferrous metals in two batches in July, totaling about 270,000 tons of copper, aluminum and zinc. The current total release 50,000 tons of copper, the market cooling effect is significant.
The reasons for the rapid rise in copper prices are as follows.
One is inflation trading. Since the outbreak of the COVID-19 epidemic, the central banks of major economies have implemented ultra-loose monetary policies, and the global liquidity environment has continued to be extremely loose;
The second is the mismatch between supply and demand. Overseas epidemics continue to recur, and there are still constraints on the supply side. The demand recovery of the global economy in the post-epidemic era is progressing faster than the recovery of supply, especially in countries represented by China, where consumption is rapidly recovering;
The third is demand expectation. The governments of major economies have introduced large-scale stimulus packages, and the market generally expects that aggregate demand will become strong;
The fourth is speculative trading. Foreign investment institutions advocate that commodities will usher in a super cycle in the context of "dual carbon". The investment fund positions of London Metal Exchange (LME) copper and the non-commercial positions of copper on the New York Mercantile Exchange (COMEX) have declined. From the end of the year to this year, it has reached historical highs.
China's copper consumption ranks first in the world, accounting for nearly 50% of the world's total copper consumption. Judging from the distribution of the global copper industry chain, domestic companies are more concentrated in the mid- and downstream links such as copper smelting, processing, and assembly. Short-term price surges have a negative impact on These enterprises, especially small and medium-sized enterprises with weak anti-risk capabilities, have had negative impacts such as high costs, sudden increase in financial pressure, and rapid shrinkage of profits, and even threatened their survival.
At such a node, the national reserves were released at the right time and achieved the expected results.
First, precise placement plays the role of "ballast stone" on the spot side. The targets of this reserve release are non-ferrous metal processing and manufacturing enterprises, aiming to directly help production enterprises suffering from rising raw material prices with the highest efficiency and lowest cost. With the backing of national reserves, the vast number of enterprises have a bottom line in cost control and are more confident in striving for excellence in production.
Second, expectation management has a speculative "crowding-out effect" on the trading side. The release of the State Reserve is to convey to participants in global commodity trading that China is confident in curbing the unreasonable rise in commodity prices. It first affects many overseas participants to adjust their predictions, which is directly reflected in the fall in trading positions of the LME and COMEX. ; Secondly, stabilize the expectations of domestic participants and prevent panic buying. The rational return of market participants' expectations is an important basis for prices to break away from speculation and return to the fundamentals of supply and demand.
After two releases of copper from state reserves, overheated copper prices have cooled down significantly recently. For domestic companies, compared with the purchase price at the high point in June, the current purchase price per ton has dropped by nearly US$1,000.
From the current mainstream point of view, it is a general trend for major economies represented by the Federal Reserve to gradually withdraw from easing, and non-industrial factors such as inflation transactions will dissipate. At the same time, as the global epidemic is brought under control, the mismatch between supply and demand will gradually return to normal. Data show that domestic copper consumption in the first half of this year has declined compared with the same period last year, and demand expectations have been disappointed; coupled with the continued release of national reserves in the later period, the price of non-ferrous metals represented by copper is expected to return to a reasonable level.
In the long run, to address the issue of copper's high dependence on foreign countries, the state can encourage and support a group of domestic enterprises to "jointly go global" and move upstream to obtain copper resources from the source, so that Chinese enterprises can play a leading role in the global copper industry chain. Achieve a certain degree of "self-hedging" price fluctuation risks within the upstream, midstream and downstream industrial chains, effectively ensure the safety and stability of the industrial chain and supply chain, promote the smooth flow of the national economy, and contribute to the long-term development of our country's economy.
