Zhonghui Futures: Copper continues to be at a discount
After returning from the Spring Festival holiday, downstream terminals are still in the off-season for consumption. The copper spot market has relatively light transactions and is basically operating at a discount. The average discount after the holiday is around 50 yuan/ton. In the context of domestic copper inventory accumulation during the holiday and poor performance of demand orders, downstream companies mostly carry out delivery and circulation through long-term orders.
Transaction activity is not high
After the Spring Festival holiday this year, it coincides with the delivery time of the Shanghai Copper 2402 contract. According to statistics, the Shanghai Copper 2402 contract of the last exchange showed a delivery volume of 73,250 tons, and the daily warehouse receipt daily of the last exchange showed a warehouse receipt of 98,733 tons, with delivery accounting for approximately 74.20%. Therefore, domestic electrolytic copper social stocks will increase significantly after the holiday, with the increase mainly concentrated in mainstream consumption areas such as Shanghai, Jiangsu, and Guangdong.
In the second half of the week, the domestic copper market ushered in the delivery time of some long-term orders. Holders delivered more downstream long-term orders. Against the background of poor order performance, some downstream companies planned to transfer inventory through long-term orders, and transactions were completed in the spot market. Activity is relatively low, and copper spot prices are mostly at a discount.
Global copper inventories are showing clear signs of rebound. As of February 23, the total copper inventories of LME, COMEX, SHFE and Shanghai Free Trade Zone were approximately 364,800 tons, a significant increase of 98,000 tons from the previous month. Among them, LME copper inventory decreased by 14,000 tons compared with last week, and the proportion of canceled warehouse receipts remained at around 18%; the copper inventory in the previous period accumulated significantly to 95,000 tons, exceeding the level of the same period in previous years. During the Spring Festival holiday, copper inventories in mainstream areas in China increased sharply by 117,400 tons to 285,700 tons compared with before the holiday, which was the largest increase in the past six years. Last year, it only increased by 39,400 tons, and the average increase in the past six years was only 6 About 10,000 tons. The main reason is that most smelters ship goods to warehouses before the holidays so that they can be delivered in time after the holidays, which makes the copper storage volume this year relatively high. However, the consumer side recovers slowly after the holidays, which accelerates the pace of domestic copper storage accumulation.
Terminal awaits recovery
At the beginning of 2024, copper smelting capacity will maintain growth. In January, China's electrolytic copper output was 969,800 tons, a month-on-month decrease of 2.96% and a year-on-year increase of 13.65%. The increase was 116,500 tons, an increase of 16,200 tons from the expected 953,600 tons. The capacity utilization rate of the country's major smelting enterprises was 81.58%. In January, some domestic smelters underwent technical renovation or relocation, as well as some refineries in the northwest region shut down for heat preservation, etc., resulting in a slight month-on-month decline in output in January. At present, disturbances at copper's overseas mines continue, and the growth rate of global concentrate supply has been reduced by nearly 1 percentage point this year. Although domestic refined copper production in January was not affected by the tight supply of copper concentrate, high costs may force smelters to start centralized maintenance plans for the second quarter ahead of schedule.
In terms of downstream demand, downstream orders after the Spring Festival in 2024 are lower than those after the Lunar New Year in previous years, and spot purchases of electrolytic copper are weak. Specifically, most refined copper rod-making companies have resumed work after the holiday, but orders have declined year-on-year; the operating rate of cable and wire companies has recovered slowly, and new orders have not yet been reflected; the copper rod and plate and strip industries have resumed production one after another, but the industry as a whole is relatively light; copper The peak season for pipe factories is approaching, and orders have increased compared with last year.
Overall, after the Spring Festival in 2024, new orders in the downstream copper industry will decline compared with previous years, but raw material inventories are generally relatively low. According to the rules of previous years, downstream companies will resume work one after another after the fifteenth day of the first lunar month. It is expected that copper spot consumption will improve, and we will continue to pay attention to the replenishment situation of downstream terminals.
