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Heading into February, copper fundamentals are not very strong, but with higher crude oil prices and energy crunching issues likely to continue to disrupt the market, the resulting rise in inflation expectations may have a positive impact on copper prices, along with the fact of
low inventories.
Overall, copper prices are expected to remain volatile.
At the macro level, the Fed's interest rate decision in January once again showed a relatively hawkish view, and federal funds rate futures showed that the number of rate hikes in 2022 may reach as many as four, which led to a significant increase in long-end US Treasury yields
.
Copper prices were under pressure for a while, but in the case of continued strength in crude oil prices, it had a certain positive impact
on copper prices.
The domestic LPR was lowered again in January, and the domestic copper price in the future market may show a strong trend
due to the loosening of monetary policy.
On the supply side, TC prices edged up by $0.
93/ton to $63.
83/ton in January, and TCbenchmark prices were negotiated at $65/ton in 2022, up from $59.
5/ton in 2021, indicating that mine supply in 2022 has a relatively wider expectation, but the disruption of factors such as high freight rates or mine closures that may result from the epidemic will still be greater uncertainty
in the first quarter and even throughout 2022 。 In addition, TC prices are expected to remain broadly stable
in February due to the approval of the Chilean Senate Mining and Energy Committee to impose an additional sales tax on Chilean mines, which will continue to be a key focus in February.
On the demand side, LPR was lowered again in January, and the previous real estate policy seemed to show signs
of recovery.
However, due to the influence of the Spring Festival factor, the consumption of traditional sectors such as domestic real estate and infrastructure in February 2022 is still difficult to find bright spots, and the replacement function of new energy for copper demand is a relatively medium- and long-term topic, so in the short term, demand is temporarily difficult to form an effective support
for copper varieties.
However, throughout 2022, after all, the attitude of maintaining the stability of the real estate market was revealed in the previous Central Economic Work Conference, so the possibility of demand gradually recovering after the first quarter is relatively large
.
However, in February, the probability of a sharp strengthening in demand is relatively small
.
In terms of inventory, the minimum level of LME registered warehouse receipts fell to less than 18,000 tons, and on October 21, the LME also urgently modified some rules to ease the pressure that may be faced due to the low warehouse receipts, and the current LME registered warehouse receipts have risen to the level around 82,000 tons, and the inventory in the previous period has not shown a significant accumulation situation, accumulating 2,177 tons to 40,359 tons
in January.
Overall, global inventories remain extremely low, which remains relatively positive
for copper prices.
