Shanghai copper maintains a weak run, copper prices will remain weak in the short term

The European debt problem has been further deteriorated due to the unstable political situation in Greece. In addition, the Chinese economy has continued to slow down, and copper prices will remain weak in the short term.

Since May, international and domestic copper prices have been operating at a weaker pace: London Copper has almost unilaterally fallen. Although Shanghai Copper is relatively defensive, its price center of gravity has continued unabated, and the Shanghai-Hong Kong exchange rate has rebounded. The European debt problem has been further aggravated by the unstable political situation in Greece. In addition, data show that China’s economic growth rate continues to slow down, and the market’s worries about the global economic outlook have increased. The market price of copper will remain weak.

Two major macroeconomic themes of market concern Greece may withdraw from the euro zone and China may introduce stimulus policies are currently the two major macro topics of concern to the market. On May 23, the EU summit ended in calm, and European leaders reiterated their support for Greece’s stay in the euro zone. However, opinions on fiscal consolidation are mixed, and the introduction of euro-zone common bonds cannot be realized in the short term. We believe that the Greek issue will still have an impact on financial markets before the June election. When the market focused on Greece's withdrawal from the storm, Spain's Catalonia Autonomous Region on May 25 exposed the torrential flow, which required the news of the Spanish central government's financial assistance. The market's worries about the debt crisis in Europe further intensified. Affected by the deteriorating export situation, HSBC China's initial PMI in May fell back to 48.7, ranking seventh consecutive month below the watershed. The continuous slowdown of China’s economic growth has on the one hand weighed on risky asset prices, and on the other hand it has increased the probability of the country introducing stimulus policies. Due to the current weak external demand and the Chinese economy being in a structural transformation stage, it is unlikely that the real estate regulation will be fully relaxed. We expect that the latter countries will continue to introduce stimulus policies in the infrastructure and appliance industries, and the possibility that projects that have stagnated in the first half of the year will be accelerated in the second half of the year. Larger sex will, to a certain extent, support the operation of copper prices.

In the previous period, the pattern of changes in Lunong's Shanghai and weak markets was changing. The tightened LME spot situation that supported the price of Lon Copper in the previous period is improving. The LME spot premium has fallen to around US$50. With China's export of refined copper through the re-export trade of the bonded zone and processing of incoming materials, LME stocks, especially Asian stocks, will gradually increase, which will further ease the tight spot situation of LME stocks. At the same time, with the fall in Shanghai copper prices, domestic bargain hunting appeared, the market’s expectations of China’s introduction of stimulus policies increased, and the holders of the stock market were more optimistic about the market outlook. The domestic spot market continued to rise slightly, and the Shanghai copper price was relatively strong against the London copper. . In the earlier period, the pattern of Shanghai's weakness was changed, and the copper exchange rate between Shanghai and London gradually rose. The import loss narrowed to around RMB 1,000/t. Judging from the current conditions, the exchange rate between Shanghai and London will continue to improve, but the improvement will be more limited.

Domestic consumption is still relatively weak In May, the operating rate of wire and cable companies was basically the same as in April, and the market still has not reached large-scale electricity bidding and bidding projects, and the overall demand is still relatively weak. Appliance companies slow down production due to high channel inventory, and the consumption season will be more inventories. Copper demand remains weak. Commercial real estate was improved due to the just-in-time trade, but the growth of investment slowed due to the unimpeded control efforts. Overall, domestic copper downstream demand remains weak.

In view of the slowdown in China's economic growth, the national leadership recently began to express steady growth in the media. Many departments dispatched investigation teams to conduct investigations and investigations and issued some corresponding policies and measures. In order to promote the consumption of energy-saving home appliances and other products, the government arranges financial subsidies to promote household appliances, automobiles, and high-efficiency motors that meet energy-saving standards. The speed of approval of infrastructure projects that have stagnated in the early stages has also accelerated significantly. Some expressway networks, airports, and rail transit projects have received centralized approval, and a number of key regional and key industry projects are gradually being introduced. It takes some time for these policies and measures to go from implementation to actual start of the project. In particular, home appliance companies need to consume upfront channel inventory. Therefore, the actual benefits in the short term will be relatively limited, but the pull of copper demand will gradually emerge in the second half of the year.

Taken together, we believe that in the short term the price of copper will remain weak, Lenco will hover around 7500-7800, and Shanghai copper will have a higher probability of oscillating between 54,000-56,000 yuan.