The copper market recorded impressive gains last year. 2018 This year, factors that could affect the balance of new copper supply include a series of labor contract renegotiations in major copper-producing countries such as Chile and Peru. As for the scrap copper market, in addition to the traditional rebound in demand driven by real estate and infrastructure projects and the growing demand from new energy vehicles, factors such as mine strikes, the absence of large-scale new copper mining projects, and China’s tightening import policies on solid waste may lead to a rapid redistribution of resources in the scrap copper market in the short term. Consequently, copper prices are expected to continue adjusting.

　　The main factors affecting copper production and prices

　　Copper ore mined from copper mines is processed through beneficiation to produce copper concentrates—or copper ore sand—with a higher copper content. To obtain refined copper and copper products, the copper concentrates must undergo smelting and refining.

　　Copper is an indispensable raw material for many light and heavy industrial processes. The copper used in industry includes electrolytic copper. ( Copper-containing 99.9%—99.95%) And refined copper ( Copper-containing 99.0%—99.7%) There are two types: the former is used in the electrical industry for manufacturing special alloys, metal wires, and electric cables, while the latter is used for producing other alloys, copper pipes, copper sheets, shafts, and more. In addition to refined copper, scrap copper is also an indispensable raw material in industrial production and, to a certain extent, serves as a good substitute for refined copper, with wide-ranging applications. During the production and use processes, scrap copper and refined copper can partially be converted into one another, and their prices exhibit a certain degree of correlation. Both futures and spot prices are influenced by the following factors:

　　Inventory

　　Both explicit and implicit inventories are important indicators reflecting the relationship between supply and demand. Explicit inventory, also known as reported inventory, refers to exchange inventories. Currently, the exchanges that have significant influence on global copper futures trading are: LME 、 CME Group Under its umbrella COMEX and SHFE All three exchanges regularly publish inventories held at designated warehouses. Implicit inventories—also known as unreported inventories—refer to the stockpiles held by producers, traders, and consumers worldwide. Since these inventories are not disclosed publicly on a regular basis, they are difficult to quantify. Consequently, the market generally relies on exchange inventories to gauge the supply of copper.

　　Import and Export Policies

　　Import and export policies—especially tariff policies—are an important tool for balancing domestic supply and demand by adjusting the costs of importing and exporting goods, thereby controlling the volume of imports and exports of specific commodities. The demand for copper imports and exports is closely linked to both domestic and international economic conditions, while the import and export of scrap copper is closely tied to adjustments in environmental standards within the market.

　　Crude oil price

　　Crude oil and copper are both crucial international industrial raw materials. The strength of demand for these commodities most directly reflects the state of the economy; thus, in the long term, fluctuations in oil and copper prices are highly correlated with the pace of economic development. Precisely because both crude oil and copper are closely linked to the macroeconomy, a certain positive correlation has emerged between copper prices and oil prices. However, this is only a general trend—on a short-term basis, the positive correlation between oil and copper prices is not particularly pronounced.

　　If oil prices were to fall below... 10 U.S. dollar / The barrel rose to 20 U.S. dollar / If the rebound in barrel prices represents a reasonable return to fair value and, more importantly, reflects economic recovery, then the rise in oil prices should align with the upward trend in copper prices—after all, both are driven by the economy’s bottoming out and subsequent recovery. However, once oil prices climb to a certain level, people’s concerns shift from economic recovery to the potential negative impact of soaring oil prices on future economic development, even triggering an economic downturn and causing an overall decline in demand (which inevitably affects copper demand). At that point, the rise in oil prices actually becomes a negative factor for the copper market. Moreover, fluctuations in crude oil and refined oil prices will influence the production costs of copper-producing enterprises, thereby exerting an impact on copper prices themselves.

　　The development status of the copper industry

　　The development of the copper industry is an important factor influencing consumption. For example: 20 Century 90 In recent years, developed countries have seen a dramatic increase in copper usage for piping in the construction industry, making construction the largest consumer of copper. The booming development of the construction sector has further boosted... 20 Century 90 In the mid-1990s, as international copper prices rose, U.S. housing starts also became one of the factors influencing copper prices. 2003 Since the past year, the development of China’s real estate and power sectors has greatly boosted copper consumption, making it one of the key factors supporting copper prices.

　　In the automotive industry, manufacturers are promoting the use of aluminum instead of copper to reduce vehicle weight and thereby decrease the industry's copper consumption. Moreover, with rapid advancements in technology, the applications of copper are continually expanding, and copper has already begun playing a role in fields such as medicine, biology, superconductivity, and environmental protection. IBM The company has adopted copper in place of aluminum in silicon chips, marking the latest breakthrough in the application of copper in semiconductor technology. These changes will affect copper consumption to varying degrees.

　　It’s worth noting that grid investment is a significant component of copper consumption. Traditionally, grid investment has focused on ultra-high-voltage transmission lines and distribution networks. Among these, the cables used in ultra-high-voltage transmission lines are steel-aluminum composite conductors, while high-voltage cables in distribution networks still predominantly use steel-aluminum composite conductors—only low-voltage wires and cables tend to rely more heavily on copper. As for the new energy vehicle market, the boost to copper consumption driven by this sector may represent a long-term trend, but in the medium and short term, its impact remains relatively limited. The growth in new energy vehicles—including both electric vehicles and charging stations—will continue to expand gradually.

　　Exchange rate

　　Internationally, copper transactions are typically priced in U.S. dollars, and the dollar-denominated copper price is often influenced by exchange rates between the world’s major currencies and the U.S. dollar. Based on past experience, fluctuations in the yen and euro exchange rates can cause short-term volatility in copper prices, but they do not alter the overall long-term trend of the copper market. While exchange rates do have some impact on copper prices, the fundamental factor driving copper price movements remains the supply-demand relationship for copper. Exchange-rate factors cannot change the basic structure of the copper market; rather, they may only affect the magnitude of price increases or decreases.

　　Production cost

　　Production costs are the basis for measuring commodity price levels. The production costs of copper include smelting costs and refining costs.

　　China's demand for imported scrap copper has declined.

　　China is the world’s largest consumer of copper. Since... 2017 Year 7 Since last month, China has announced adjustments to its regulations on importing scrap copper. “ Waste Category Seven ” Imports are expected to shrink significantly, including scrap metals and cables, which must first be disassembled and sorted before they can be processed and officially put into use. The tightening of China’s environmental standards marks... 2018 The annual import quota for scrap copper will be comprehensively tightened. First, the intermediate links in China’s scrap copper supply chain will be systematically eliminated; henceforth, only end-users and processors of scrap copper will be allowed to import it, while other market participants—such as traders and merchants—will be barred from doing so. Second, it is proposed to limit the levels of harmful impurities to: 1% Only the purest scrap copper can meet this quality threshold. Due to rising environmental standards and anticipated adjustments to scrap copper import regulations, scrap copper imports are expected to decline annually. 33 Ten thousand tons.

　　China’s imports of scrap copper have been declining year after year, partly due to the quality-control measures introduced earlier by Chinese authorities and partly because of the earlier collapse in copper prices. When prices were low, the supply of old scrap copper dwindled, helping to balance the market by offsetting the oversupply of high-quality copper; as prices rebounded, the scrap-copper chain once again gained momentum. This has been the situation in the copper market over the past year or so. 2016–2017 Copper prices rebounded sharply this year, and as the discount on scrap copper widened, supply surged. China absorbed this additional supply.

　　Behind the tightening policies on scrap copper imports, imports of mixed copper continue to decline, signaling that the Chinese market has gradually entered a cycle of scrap copper recycling. Moreover, as domestic sales of air conditioners and other appliances rise, so too does the peak in end-of-life equipment generation. Consequently, the proportion of domestically recycled scrap copper is steadily increasing—this is precisely why China... 2018 Considerations regarding the ban on importing seven categories of scrap metal at the end of the year. In China’s demand for scrap copper, domestic supply has already surpassed import demand, and as China’s domestically produced scrap copper output continues to rise in the future, its reliance on overseas supplies will gradually decrease.

　　China's imports of refined copper have increased significantly.

　　The sharp decline in scrap copper imports has boosted demand for refined copper imports, causing copper futures prices to rise significantly. After... 2017 Year 9 After the monthly high was reached and then fell back, 10 Under Yuezhi Exchange COMEX Copper futures prices not only regained their strength but also reached new highs for the year. Although they subsequently failed twice to break higher and prices dipped somewhat, the decline was relatively mild, and prices remain at their year-to-date highs.

　　According to statistics, as of... 2017 Year 11 Moon 7 Day, COMEX Since the second half of the year, copper prices have accumulated a gain exceeding... 15% As copper prices surged sharply, the rise in domestic Chinese scrap copper prices was limited, causing the price spread between refined copper and scrap copper to widen. 2000 Above normal, significantly higher than usual. 1000 Yuan.

　　In addition, the tightening of environmental standards has also had a significant impact on China’s refined copper smelting industry. Data shows that... 2017 Year 11 In the month, China's imports of refined copper increased year-on-year. 18.95% ，11 China's imports of unwrought copper and copper products reached their highest level in a year, highlighting the boost to import demand driven by China's domestic environmental restrictions on production.

　　However, from a demand perspective, if China’s copper consumption slows down, the current market’s overly optimistic outlook on copper prices could pose significant risks. Looking at the global copper consumption landscape, China accounts for the largest share of global copper consumption. The International Copper Study Group ( ICSG ) The data shows that, 2017 Year 8 China's copper consumption accounts for [percentage] of global copper consumption. 50.5% Therefore, once China’s copper consumption slows down, it will mean that global copper consumption will also face a significant decline.

　　However, from CFTC According to the disclosed fund holdings, overseas funds are very optimistic about base metals, especially copper. As of... 2018 Year 1 Moon 2 Day, COMEX Copper non-commercial net long positions hit a record high. 1995 Year 4 Moon 18 New high since the day before yesterday 62284 Sign the contract.

　　 Quick Strike The options analysis tool shows that, 2018 Year 2 Moon 22 Due on the day, with a strike price of 3.2185 U.S. dollar / Pound's COMEX Copper options have the largest open interest among all options contracts, with call options and put options reaching: 3381 Zhang He Yue and 3764 The contract terms fully reflect the market’s optimistic sentiment.

　　Two markets, two trends

　　2018 The copper supply chain is facing unpredictable conditions, and the global copper market is under threat of supply disruptions. The refined copper industry is threatened by the possibility of strike action, while the scrap copper sector is clouded by China’s import restrictions. Global scrap copper supplies are undergoing a turning point, and the refined copper industry is experiencing sluggish supply due to declining investment in mining.

　　As for the supply of new copper, copper prices are highly likely to keep rising. The underlying reason is that a pattern of slow growth in future supply has already taken shape. The root cause of this pattern lies in the consecutive years of decline in global capital investment in copper mining during the earlier period, which will result in only a handful of large-scale projects coming online in the coming years. Faced with steadily growing market demand, the upward support for copper prices is gradually strengthening.

　　Large-scale infrastructure investments are driving continuous growth in market demand for copper, further supporting copper prices. Trump has stepped up his investment in infrastructure; he had previously pledged that in the future... 10 Will be invested this year 1 Trillions of dollars are being allocated to expanding and rebuilding infrastructure such as highways and airports, prompting investors to bet that the infrastructure boom will boost demand for raw materials—and copper demand will also rise. China’s fixed-asset investment plans have already become a key component of copper demand. “ The Belt and Road ” The advancement of construction has significantly accelerated the implementation progress of the fixed-asset investment plan. 2017 Year 1 To 10 Month, nationwide fixed-asset investment (excluding households) 517818 100 million yuan, up year-on-year 7.3% ; Industrial investment 190971 100 million yuan, up year-on-year 3.3% 。

　　In addition, in the new copper market, uncertainties surrounding the supply from major copper mines are gradually becoming apparent. Glencore ( GLEN.L ) Chile operated by Lomas Bayas The copper mine has just averted a strike threat—although union workers accepted the terms of the new labor contract at the last minute, this still signals that labor disputes could persist and continue to affect new copper prices. 2018 The number of contracts to be renewed this year has reached a record high. 2010 The highest level in years, with most of the renewed copper mine development contracts located in Chile and Peru. According to Citibank ( Citibank )’s estimate, in the future 12 The month will be nearly... 30 Collective labor contract negotiations could impact the global situation. 25% The copper supply has significantly increased the uncertainty surrounding copper availability.

　　The ongoing strike actions at the mine pose a significant threat to its supply, especially at Escondida—the world’s largest copper mine. Hidden ). The mine 2017 The year's strike lasted. 44 Day has an immeasurable impact on production. Meanwhile, the world’s second-largest copper mine... —— Indonesia Grasberg Copper mines are also facing production shutdown issues. 2017 At the beginning of the year, a spokesperson for Freeport-McMoRan Copper & Gold Inc.'s Indonesian operations stated that the company had suspended its activities in Indonesia. Grasberg Copper mine production has been halted, and workers have been sent home, as the company has yet to reach an agreement with the Indonesian government on a new mining permit. As for... 2018 Regarding this year’s new copper supply, analysts have all adjusted their forecasts for the extent of supply disruptions, taking into account the possibility of labor disputes this year. Against the backdrop of rising prices, workers will be less willing to make easy concessions; the higher the copper price, the greater the risk that copper mines will be forced to halt production due to labor disputes. Consequently, labor actions and uncertainties at mining sites could... 2018 The year triggered significant price fluctuations.

　　In terms of scrap copper supply, China’s reduction in scrap copper imports will lead to an adjustment in the global market’s supply and demand for scrap copper. The global scrap copper supply chain will face... “ Misalignment and Disconnection ” China is set to face a shortage of scrap materials, while scrap supplies in other regions are expected to continue rising steadily. Amidst the ongoing rise in new copper prices, the supply of scrap copper should increase accordingly. According to S&P Global Platts ( S&P Global Platts ) Data, “2 Number ” Copper scrap prices compared to CME Spot copper discount 0.41 U.S. dollar / Pound, with a relatively larger water adhesion. 7 Of the moon's time 0.30 U.S. dollar / Pound expands. “2 Number ” Waste copper, typically consisting of copper wires and copper pipes, needs to be purified before processing. 1 Number ” Brightness ( bare bright ) Scrap copper is sold at a discount. 0.14 The U.S. dollar was at a discount one year ago. 0.08 The U.S. dollar. In the medium to long term, market flows are expected to adjust once again.

　　After restricting imports of scrap copper, China’s waste materials industry will continue to export higher-polluting waste. “ Waste Category Seven ” The tightening of environmental standards signals that other types of highly polluting materials will continue to shift elsewhere. China is expected to become an exporter of scrap copper in order to alleviate domestic environmental pressures; accordingly, China’s own waste generation and processing chain is projected to develop steadily.