ABSTRACT: Minsheng Securities analysts said that the fourth quarter continues to bullish copper prices, global demand rebound, tight supply and inventory decline will support copper prices are expected to continue strong upward.

BEIJING, Oct. 19, Minsheng securities analysts said that copper prices will continue to be bullish in the fourth quarter, with a rebound in global demand, tight supply and lower inventories all supporting copper prices that are expected to remain strong.

1. Prices rise by more than 40% in half a year

In the spot market, the current electrolytic copper spot on the contract of the month of 190 yuan ~ 230 yuan per ton, the average price of 210 yuan per ton. Ping Shui Copper Trading Price 51760 ~ 51860 Yuan/ton, Sheng Shui copper trading price 51780 ~ 51880 Yuan/ton.

China imported 2.9 million tons of electrolytic copper from January to August this year, up 35 percent year-on-year, according to Jin Tou. com. Due to the impact of the epidemic on transport, supply of copper from South America blocked, the third quarter of the route was restored, coupled with strong demand for restocking of enterprises, copper imports increased significantly. Analysts said the latest inventory data from the three major futures exchanges plus the Shanghai Free Trade Zone, as of Oct. 9, totaled 600,000 tons, the lowest level since the data were available. Copper prices in Shanghai hit a year low of 35,300 yuan per ton on March 23, and have been rising since then, rising more than 44 percent recently to around 51,000 yuan per ton.

2.Strong domestic demand for copper

Copper is the third most important metal after iron and aluminum in China. In 2002, China's consumption of electrolytic copper surpassed that of the United States, and in 2006, China's output of electrolytic copper surpassed that of Chile. According to statistics from the International Copper Association, China's copper consumption has increased for 10 consecutive years. In 2017, China's copper consumption was 13.4 million tons, nearly 50 percent of the global total, firmly occupying the position of the world's largest producer and consumer of electrolytic copper.

The demand side of copper is mainly electricity, electronics, home appliances, construction, transportation and so on. The Electric Power Industry is the first application of copper downstream, in 2018 copper accounted for 49.4% of China's total copper demand. The application of copper in electric industry mainly includes electric power transmission, motor, communication cable and Residential Electric Circuit.

Copper Tube is an important material in the refrigeration equipment such as air conditioning, which is used in the manufacture of heat exchangers, connecting pipes and fittings. According to the data, in 2018 copper consumption accounted for 16.3% of China's total copper demand, which is the second largest downstream of copper consumption. In 2018, China's shipping demand accounted for 9.2% of copper downstream consumption. Copper and copper alloys are mainly used in car radiator, brake system, hydraulic device, gear bearings, brake pads, as well as the vehicle's various joints, accessories and so on.

In 2018, copper consumption accounted for 6.9% of China's total copper demand. Copper is mainly used in semiconductor integrated circuits, electric vacuum devices, printed circuits, etc. 

The rapid growth of grid investment this year, coupled with the development of integrated circuits and new energy vehicles, domestic demand for copper is strong. Copper has both financial and commodity attributes. Guosen securities said extreme global liquidity easing had helped copper prices to move higher. The impact of the epidemic on the global copper supply chain makes the supply of domestic copper mines become tight. The downward trend of processing fees will increase the stoppage and overhaul of domestic copper smelting enterprises. The worst point in the global balance of supply and demand came in the first half of the year. The current pattern of global liquidity easing will not change in the near future, and the logic of resuming production and work in Europe and the United States will be gradually verified. The global supply-demand balance of refined copper in the second half of this year is expected to be reversed, and the outlook on copper prices is cautiously optimistic.

Source: Changjiang non-ferrous Metal Net