August 2022 cable raw materials (copper) monthly report

First, the macro aspect

International aspect,

1.
Metal prices are lower
as confidence in the global economy remains low.
Stocks fell, the dollar held strong near more than 20-year highs, and expectations of interest rate hikes were high
.
Whitcomb said investors were nervous
about the hawkish stance of the Federal Reserve, higher global interest rates, weak sentiment in Asian markets and the possibility of a sharp 75 basis point rate hike by the European Central Bank.

2.
The eurozone is in trouble, with the manufacturing PMI falling sharply in August, which means that output has fallen for three consecutive months, increasing the likelihood of
a decline in GDP in the third quarter.
Forward-looking indicators suggest that recessions are likely to intensify in the coming months, perhaps even significantly, implying that recession risks have risen
.

3.
Institutional evaluation of Japan's July CPI data: Japan's inflation rate in July accelerated further, exceeding the central bank's 2% target, which will make it difficult for Bank of Japan Governor Haruhiko Kuroda to explain why he insists on the need to continue to maintain ultra-low interest rates
.
The July core CPI rose 2.
4%
year-on-year.
Excluding the impact of the sales tax hike, it was the strongest reading since 2008 and in line with
economists' expectations.

Domestically,

1.
According to the National Bureau of Statistics, the continuous development of preferential policies for automobile and home appliance consumption will drive the growth
of bulk commodity sales.
And under the role of more precise epidemic prevention and control and consumption promotion policies, household consumption is expected to gradually recover, especially the preferential policies for automobile and home appliance consumption continue to make efforts, which will drive the growth
of bulk commodity sales.
In July, the retail sales of automobile goods above designated size increased by 9.
7% year-on-year, continuing to maintain rapid growth
.

2.
According to August manufacturing data, China's economic growth is facing headwinds, which is also unfavorable
to metal demand.
Caixin/Markit's manufacturing purchasing managers' index (PMI) slipped to 49.
5 for August from 50.
4 in July, below analysts' expectations of 50.
2
.
The official August manufacturing PMI was slightly better than expected, but contracted
for the second month in a row.

3.
Data show that in the first eight months of this year, the scale of local bond issuance exceeded 6 trillion yuan, reaching 6,047.
4 billion yuan, a year-on-year increase of 24%.

Among them, 4,021 billion yuan of new local bonds were issued, a year-on-year increase of 62.
4%.

Xie Zheng, senior investment consultant of Jufeng Investment Advisory, told reporters that the scale of new local bond issuance this year has increased sharply and the issuance speed has accelerated, reflecting the forward force of active fiscal policy and efforts to stabilize the macroeconomic market
.

Second, the market review

Since August 2022, domestic copper prices have continued to fluctuate and rise, although there was a brief pullback during the period, but on the whole, copper prices continued to rise, and the pattern of internal strength and external weakness was prominent
.
Represented by Yangtze River spot 1# copper, the average price of copper # 1 at the beginning of the month was 61660 yuan / ton, as of August 31, the average price of Yangtze River spot 1# copper was 62920 yuan / ton, and the price rose by more than 1260 yuan / ton, an increase of 2.
04%.

Looking back, with the US inflation data showing signs of peaking, CPI has fallen from historical highs, hawkish expectations of interest rate hikes have eased, the impact of macro factors has gradually faded in August, and the market has returned to fundamental guidance
。 In particular, the supply-side disturbance is frequent, the news of domestic storage of copper and nickel fermentation at the beginning of the month, the worry of monthly squeeze caused by low inventory in the middle of the month continues to heat up, and the continuous high temperature in the country in the second half of the month caused domestic smelters to reduce production again exceeded market expectations, and the supply of electrolytic copper around Shanghai was particularly tight, superimposed on the European energy crisis around the metal production reduction news many times.
The decline in supply provided copper prices with momentum above 63,000, continuing the current round of restorative rally that began in mid-July, and after the Fed issued a firmer outlook for tightening monetary policy at the end of the month, copper prices quickly gave up gains and returned to the downward channel
in view of recessionary pressures and expectations of weaker demand.

Overall, the domestic steady growth policy followed, coupled with the expected heating up of smelting disturbances due to power cuts, and the market bullish sentiment prevailed in August
.
However, in the future, with Powell's hawkish voice again, the market's expectations for tightening have also heated up sharply, and the market needs to be wary of the possibility
that the market may return to recession trading in the future.

Looking forward to September, with the sharp rise in global energy prices, inflation expectations may rise again in the future, we need to be wary of the possibility of another acceleration of Fed tightening, in the short term, under the uncertainty of macro expectations and the impact of fundamental restrictions, copper prices may be dominated by wide fluctuations, and the space for continued growth may be limited
.
Considering the current negative macro and market concerns about demand, risk aversion is still fermenting, and there is room for downward adjustment in prices
.

3.
Waste market

In August, downstream demand showed the characteristics of the off-season, and buying was dominated
by rigid demand.
The high temperature in many places in China set a record, smelters were forced to limit power and reduce production in the middle of the month, the market supply was in short supply, and the good copper premium in East China once soared to more than 700 yuan, and the downstream stopped and waited for the mood to be heavy; Inventories in South China are also low, and the premium is high
.

Spot copper fell by about 1,100 yuan / ton in August compared with the previous month, and scrap copper fell by about
400 yuan / ton.
The difference in refined waste was around 590 yuan, down 270 yuan
from last month.

In August, the Shanghai copper market fluctuated upward, the overall market in July was weak, and the market began to rise in early August, boosting market confidence, a small number of traders began to ship, profit taking, and the trading atmosphere began to warm.

By August 26, the market reached its peak of the month, before which traders and copper mills received goods
at high prices when the market was tight and the market was good.
Among them, the price of copper in mainstream markets such as Foshan, Baoding, and Linyi is higher than that of copper factories in the country, and many copper factories are stationed in the local salesman to
carry out the pressure.
In addition, the polarization of merchants is obvious, and some of them are afraid of decline, and they are shipping at high prices; The other part is bullish to maintain a strong price; And the price of some traders is higher than that of copper mills, and the geographical differences in trading are obvious
.
After the 29th, the market declined, the circulation of goods decreased, traders covered the goods and sold, and the market transaction turned light
.
Copper mills due to rising raw material prices, downstream orders are not good, profits are thin to the operating rate decline significantly
.

4.
Inventory

Overseas, LME copper stocks fell by 3,300 tonnes to 120525 tonnes as of August 26 and COMEX stocks decreased by 1,984 tonnes to 52,664 tonnes
.
In terms of domestic social inventory, it is still at a low level in recent years, and it is also at a low level
since March this year.
On August 25, the spot inventory of electrolytic copper in the domestic market was 50,700 tons, down 08,000 tons from the previous week; Shanghai's inventory was 39,600 tons, down 03,600 tons from the previous week; Guangdong's inventory was 04,600 tons, down 03,700 tons from the previous week; and Jiangsu's inventory was 03,500 tons, down 01200 tons
from the previous week.

Recently, copper stocks in Shanghai and Guangdong markets have continued to decline, and there is an urgent situation of inventory
.
The Guangdong market is close to the lowest inventory level since 2021, and copper spot premiums have climbed
sharply.
Recently, the Shanghai-London ratio has also performed well, the import profit window continues to open, coupled with the rising domestic spot premium, so that the import profit space expands, and continues to stimulate the import of electrolytic copper customs clearance; However, due to the small amount of copper overseas, the inventory in the bonded zone is relatively low, so the customs clearance volume is only maintained in a small amount; However, the inventory of the bonded zone continued to show a slight downward trend
.
On the whole, the tight supply of the spot end has a strong supporting effect on copper prices, which will be more reflected in the change of spot premium discount, and it is still necessary to pay attention to the sustainability of
destocking in the later stage.

5.
Industry news

1.
Foreign power news on August 3, data released by the Zambia Mining Chamber on Tuesday showed that the country's copper production fell by 7.
4% to 364,089 tons
in the first half of 2022.
Zambia's copper exports in June fell 8.
4%
from the previous month.
Despite the government's tax incentives for mining companies this year and improved the operating environment across the board, copper production fell sharply in the first half of the year
.
Zambia is not expected to meet its target
of 1.
3 million tonnes in 2022.
Production at both of First Quantum's mines operating in Zambia declined as prolonged rainfall and pandemic restrictions impacted production in the second quarter
.
The government aims to increase production to 2 million tonnes by 2026 and 3 million tonnes
by 2031.

2.
On August 3, Chile's National Copper Commission Cochilco said that Chile's June LosPelambres copper production fell 50%
year-on-year.
The Los Pelambres copper mine, owned by Antofagasta, is located in Chile's Coquimbo region
, 240 kilometers northeast of Chile.
The mine produces copper concentrate (gold and silver in the concentrate) and molybdenum concentrate through grinding and flotation processes
.

3.
Zijin Mining issued an announcement
on the early commissioning of the second phase of the Kamoa-Kakula copper mine in the Democratic Republic of the Congo.
In 2022, the Kamoa-Kakula copper mine plans to produce 290,000-340,000 tons
of copper.
The mine has a copper resource of 43.
59 million tonnes at an average grade of 2.
53%.

After the second phase of the project is put into operation, it plans to increase the production capacity of the original design and selection scale of 7.
6 million tons/year to 9.
2 million tons/year through one year of technical transformation, and achieve an annual output of more than 450,000 tons of copper, becoming the world's fourth largest copper-producing mine
.
The company is fully promoting the preliminary work of the third phase of the project, striving for the total mining scale of the Kamoa-Kakula copper mine to reach 19 million tons, with a maximum annual output of more than 800,000 tons of copper, becoming the second largest copper mine in the world
.

4.
According to foreign news on August 11, data released by the Central Bank of the Republic of Congo on Thursday showed that copper production increased by 51% and cobalt production increased by 37%
in the first quarter of 2022.
In the first three months of this year, the country produced 572,983 tonnes of copper and 28,990 tonnes of cobalt in the first quarter
.
Over the same period, gold production increased by 4.
4% y-o-y to 7,797kg
.
Congo is a global producer of
cobalt.

5.
Foreign news on August 9, statistics from the Peruvian Ministry of Energy and Mines show that after the local indigenous community stopped protests, the country's copper production in June was 198467 tons, an increase of 8.
6%
year-on-year.
In the first six months, cumulative copper production was 1.
08 million tons, an increase of 1.
2%
year-on-year.
After a shutdown in late April, Minmetals Resources' Las Bambas copper mine resumed production
in early June.
However, the moratorium agreement approved by the six indigenous communities that had been holding protests ended in late July after a full month of negotiations failed to reach an agreement
to resolve the conflict.

6.
Foreign news on August 25, Peru's finance minister said that he lowered the country's economic growth forecast for this year to 3.
3%, and officially abandoned the plan
to raise taxes on the mining industry amid falling metal prices, high inflation and slower growth.
The ministry said in a report that the downward revision to the economic forecast was due to "temporary supply shocks" affecting the primary sector in the first half of the year, including social unrest in the mining sector, as well as less favourable external conditions
.
Peru expects Anglo American's Quellaveco copper mine to come online in 2023 and boost copper production, which has fallen 10 percent so far this year, as community protests affect two large mines owned by MMG and Southern
.