As the Federal Reserve cuts interest rates to deepen the boost to investment and consumption, while opening up domestic monetary policy space, the inflation rebound brought about by loose monetary and fiscal policies after the US presidential election will support the upward movement of copper prices.
According to the Securities Times app, Huafu Securities released research reports stating that in October, the import quantity of copper concentrate was 2.31 million tons (65.1 from Chile + 64.2 from Peru), a decrease of -0.121 million tons/-5.0% month-on-month; the import volume of copper concentrate from January to October was 23.385 million tons (746.9 from Chile + 589.4 from Peru), an increase of 0.777 million tons/+3.4% year-on-year. On the processing side, in October 2024, China's copper material production was 1.967 million tons, a decrease of -0.3% year-on-year, -2.3% month-on-month; from January to October, the cumulative copper material production was 18.274 million tons, a cumulative year-on-year decrease of -1.1%. Looking ahead, the direction of the Federal Reserve's interest rate cut is confirmed, the tight balance of copper supply and demand provides strong support for copper prices; in the medium to long term, as the Federal Reserve deepens interest rate cuts to boost investment and consumption, while opening up domestic monetary policy space, the inflation rebound brought about by loose monetary and fiscal policies after the US presidential election will support the upward movement of copper prices.
Huafu Securities' main points are as follows:
On the raw material side: copper concentrate imports decrease month-on-month, while copper scrap imports increase month-on-month.
1) Copper concentrate imports and exports: In October, the import quantity of copper concentrate was 2.31 million tons (65.1 from Chile + 64.2 from Peru), a decrease of -0.121 million tons/-5.0% month-on-month; the import volume of copper concentrate from January to October was 23.385 million tons (746.9 from Chile + 589.4 from Peru), an increase of 0.777 million tons/+3.4% year-on-year.
2) Copper scrap: 1) Imports and exports: In October, China's copper scrap import quantity was 0.183 million tons, an increase of 0.028 million tons/+17.9% year-on-year, an increase of 0.023 million tons/+14.2% month-on-month. The import volume of copper scrap from January to October 2024 was 1.857 million tons, an increase of 0.254 million tons/+15.8% year-on-year; 2) Profit: In October, the refined scrap price difference fell slightly on a month-on-month basis, with this month's average refined scrap difference at 1311.9 yuan/ton, a decrease of 214.2 yuan/ton (a decrease of 14.0%) from the previous month, an increase of 512.5 yuan/ton (a rise of 64.1%) year-on-year.
Supply side: Cathode copper production declined in October, with imports rebounding.
1) Output: The output in October was 0.9798 million tons, -1.2% year-on-year, -2.4% month-on-month, with a capacity utilization rate of 79.61%. From January to October 24, the cumulative output of electrolytic copper was 9.844 million tons, +36.0 tons/+3.3% year-on-year; 2) Imports and exports: In October, the import quantity of cathode copper was 0.359 million tons (14.5 from the Congo + 4.8 from Chile), +0.026 million tons/+7.7% year-on-year, +0.037 million tons/+11.4% month-on-month; The cumulative import quantity of cathode copper from January to October 2024 was 3.007 million tons, +0.187 million tons/+6.6% year-on-year; 3) Profits: This month, the average processing fee for spot crude copper was $10.5/ton, - $77/ton or - 88% year-on-year, +$5.07/ton or +93.37% month-on-month; The price of sulfuric acid in October was 377.93 yuan/ton, -3.14 yuan/ton month-on-month.
On the processing side: The production of copper materials declined month-on-month, while exports remained stable.
1) Output: In October 2024, China's copper material output was 1.967 million tons, -0.3% year-on-year, -2.3% month-on-month; From January to October, the cumulative output of copper materials was 18.274 million tons, with a cumulative year-on-year decrease of -1.1%. 2) Imports and exports: The export volume of copper materials in October was 0.0801 million tons, +0.0107 million tons/+15.4% year-on-year, +24.67 million tons/+3.2% month-on-month. From January to October, China's cumulative copper material export volume was 1.1118 million tons, with a cumulative year-on-year increase of +29.6%.
End-user demand: The apparent demand in October was 1.329 million tons, +1.4% month-on-month.
End-user demand: In October, air conditioner production was 16.202 million units, +14% year-on-year; refrigerator production in October 24 was 8.971 million units, +6.8% year-on-year; From January to October 24, the cumulative year-on-year decrease in housing construction area was -22.6%, while the cumulative year-on-year decrease in completed area was -23.9%; In October 24, the production of new energy vehicles was 1.428 million vehicles, +44.5% year-on-year; From January to October 24, the cumulative photovoltaic production was 543.43 million kilowatt-hours, with a cumulative year-on-year increase of +15.5%.
Macro Analysis
In October, the seasonally adjusted CPI in the USA recorded an annual rate of 2.6%, slightly higher than the previous month's 2.4%, meeting market expectations; The monthly rate of core CPI in October was flat compared to the previous month, both at 3.3%. Overall, the Fed's interest rate cut cycle has begun, Trump's successful election as president has temporarily suppressed copper prices around the 'Trump trade,' but the long-term trends of the U.S. loose monetary and fiscal policies remain unchanged.
Investment advice
On the supply side, this week, the spot TC of copper concentrate is stable at a low level, and attention needs to be paid to the negotiation of the annual processing fees at the end of the 25th year. On the demand side, after the weakening of copper prices, stimulating end demand has led to a significant improvement in new orders for many cable companies. The demand for copper enameled wire by transformers continues to be strong, and the demand for copper enameled wire orders from household appliances has warmed up due to the replacement of old appliances with new ones. The replacement of old with new and export demand have increased the production of air conditioners, refrigerators, and washing machines in November and December, leading to an increase in demand for copper tubes. The direction of the Fed's rate cuts is determined, and the tight balance between copper supply and demand provides strong support for copper prices. In the medium to long term, as the Fed's rate cuts deepen to boost investment and consumption, while opening up domestic monetary policy space, combined with the inflation rebound brought by the loose monetary and fiscal policies after the U.S. election, will support the upward movement of the copper price center.
Regarding Symbol.
A-shares: Leading the way is Zijin (601899.SH), with a focus on Cang Ge (000408.SZ); other companies of interest include Luomu (603993.SH), JCHX (603979.SH), Tongling (000630.SZ), Western Mining (601168.SH), North Copper (000737.SZ), and Jiangxi Copper (600362.SH);
Hong Kong stocks: Focus on Minmetals (01208) and China Molybdenum (08306) among others.
Risk warning: Lower-than-expected downstream demand, U.S. economic hard landing.
