(1) Jinyu Futures: 2017 Copper Market Outlook—Still Chilly Despite Brief Warmth

　　Key points from the annual report:

　　1. The rapid upward trend in copper prices in 2017 will be hard to sustain, and a major bull market is not yet on the horizon.

　　2. In 2017, China’s domestic economy showed a pattern of high growth in the first half and lower growth in the second half. The timing of economic stabilization will depend on the duration and strength of real estate investment and its impact on the restocking cycle in related industries.

　　3. We’ve slightly lowered next year’s consumption growth rate to 3%.

　　4. Overseas consumption remained stable with a slight increase;

　　5. Domestic consumption of scrap copper may show marginal improvement, though its sustainability remains to be seen.

　　6. In 2017, the growth rate of global refined copper supply slowed slightly but remains subject to uncertainties.

　　The annual average spot price of copper on the Yangtze River is expected to rise by 16.1% from 37,900 yuan per ton in 2016 to 44,000 yuan per ton, with a core fluctuation range of 37,000 to 53,000 yuan and a potential peak of 55,000 yuan. The annual average spot settlement price of LME copper is projected to increase from $4,850 per ton in 2016 to $5,300 per ton, with a core fluctuation range of $4,700 to $6,300 and a potential peak of $6,500 per ton.

　　(2) The Futures Investment Promotion Section: Withered Trees Reborn—Copper Price Volatility Shifts Higher

　　Key points from the annual report:

　　Looking ahead to 2017, the global balance between supply and demand for electrolytic copper may shift to a new equation: "Copper concentrate supply growth + scrap copper supply growth = electrolytic copper consumption growth." In 2017, the growth rate of copper concentrate supply is likely to remain at 1%, while the growth rate on the scrap copper supply side could rise to 6% due to the rebound in copper prices. Overall, next year's electrolytic copper supply growth is expected to be around 1.5%. Meanwhile, many consulting firms forecast that next year's consumption growth will also fall within the range of 1% to 2%. Therefore, copper prices are likely to continue experiencing volatile fluctuations next year. However, following the recent price rally, expectations for industrial investment have shifted significantly. As a result, both restocking demand and speculative demand are expected to increase, adding further volatility to the demand side. Consequently, the average copper price in 2017 is projected to move higher.

　　The long-term TC for mines and smelters has been lowered to US$92.5 per tonne. According to negotiations between CSPT and foreign mining companies, Freeport and Jiangxi Copper have finalized the pricing for their first-ever long-term copper concentrate contract at US$92.5 per tonne, compared to US$97.25 per tonne last year—a slight decrease that falls slightly below market expectations. The downward revision in 2017 long-term contracts may reflect a contraction in the supply side of copper concentrate, and the growth rate of copper concentrate in 2017 is likely to remain around 1%.

　　CODELCO has lowered the premium for long-term contracts with China to US$72. Chile’s state-owned copper company has set the premium for its long-term electrolytic copper shipments to China at US$72, down from US$98 last year—a 27% decrease—reflecting concerns about China’s copper demand next year. Constrained by the impending turning point in the real estate sector, many institutions have also revised downward their forecasts for China’s economic growth next year, projecting that domestic refined copper consumption growth could slow to 2.7%.

　　On the supply side, there’s a slowdown, and on the demand side, too—yet the supply-demand contradiction isn’t particularly pronounced. We expect both global supply and demand growth to slow down next year, which means copper prices are likely to continue fluctuating in a range-bound pattern without any clear one-sided trends emerging. However, demand remains highly volatile, and this year’s sharp price surge across all commodities has reshaped expectations for industrial investment. As a result, industries are expected to increase their inventory turnover levels next year. Coupled with speculative demand and the need to replenish inventories across the entire value chain, annual demand growth is likely to slightly outpace supply growth, causing the center of copper price fluctuations to shift upward.

　　Operational Recommendations: Real estate-related downstream consumption may carry over into the second quarter of next year. Coupled with post-holiday restocking demand in the copper industry’s downstream sectors, copper prices could rise during the first and second quarters. However, with a greater number of new smelters coming online in the second half of the year and ample supply of scrap copper following rising copper prices, the center of copper price fluctuations is expected to shift downward. We forecast that copper prices in 2017 will trend higher in the first half and lower in the second half.

　　(3) CITIC Futures: Supply pressure eases slightly, while macro allocation adds fuel to the fire.

　　Key points from the annual report:

　　1. The room for further reduction in copper mining costs is narrowing, and declining investment in mines is increasing the disruption rate of copper production.

　　2. Demand for inflation-hedging commodities, coupled with the potential repeal of the Dodd-Frank Act, may increase funds’ preference for the copper market.

　　3. On the actual consumption front, there is emotional-driven inventory replenishment at the short end, providing support; however, after the second quarter, consumption could be proven to be unfounded.

　　Price Outlook:

　　Our confidence in the upward shift of copper prices has increased, with the price range expected to move higher to between $4,800 and $6,800. In terms of timing, before the peak consumption season arrives, the market’s inventory-replenishment logic will remain intact, driving copper prices to fluctuate and rise. Once the peak consumption season begins, the market will need to closely monitor the actual impact of the peak season. If the peak season fails to materialize as expected, copper prices could come under downward pressure. Therefore, during the first quarter—when consumption has yet to be disproven—copper prices are likely to remain supported and continue their upward momentum. After entering the second quarter, the actual performance of consumption will directly determine whether copper prices can sustain their high-level trajectory. In the second half of 2017, the overall regulatory effects on the real estate market began to take effect; thus, it will be crucial to track how PPP projects and external demand offset the risks posed by the real estate sector to gauge the true state of consumption.

　　In terms of the overall momentum and strength of copper prices, they depend on inflation conditions as well as the actual effectiveness of whether the U.S. will repeal the Dodd-Frank Act.

　　Major risk factors:

　　1. PPP projects cannot hedge against the risks in the 2017 real estate market.

　　2. The proposal to repeal the Dodd-Frank Act, mentioned in Trump’s campaign statement, was rejected.

　　3. Inflationary pressures have been debunked.

　　(4) Huatai Futures Report: Copper mine supply faces shortages, and demand becomes the key factor influencing copper price trends.

　　Key points from the annual report:

　　1. Supply-Demand Balance of Copper Concentrate:

　　Starting in 2017, due to the commissioning of new smelting capacity and insufficient subsequent expansion of copper concentrate capacity, a significant shortage of copper concentrate relative to smelting capacity emerged. The supply of copper concentrate directly constrained the output of refined copper. Given the relative shortage of copper concentrate compared to refining capacity, from 2017 to 2018, the copper concentrate processing fees—TC/RC—could potentially fall below US$80 per ton and 8 cents per pound.

　　2. Balanced Supply and Demand for Refined Copper:

　　In 2017, global refined copper supply and demand were roughly balanced; however, a supply gap began to emerge in 2018, and this gap rapidly widened in 2019.

　　2017 Strategy

　　1. Main strategy for 2017: Buy on dips.

　　2. The primary buying range in 2017 was $5,000 per ton—a reasonable profit margin for Chilean refined copper production.

　　3. The primary buying window in 2017: possibly during the second quarter, after domestic refined capacity comes online.

　　4. Projected profit margins: Given the generally bullish outlook for copper prices in 2017, 2018, and 2019, the expected profit margin could exceed USD 3,000 per ton.

　　5. 2017 Fundamental Focus: Given that price-driven factors in 2017 are still expected to be supply-driven, the primary focus will be on copper supply indicators from Chile and Peru.

　　2017 Strategic Risk

　　1. Main strategic risks for 2017: Demand is the primary risk. Based on our calculations in the annual report, we have made the maximum estimate of global demand for 2017. If demand growth falls short of expectations, copper prices could experience volatile fluctuations.

　　2. Key risk indicators to watch in 2017: Whether China’s 13th Five-Year Plan for power distribution is being implemented as scheduled.

　　(5) CRU Report: 2017 Copper Market Outlook

　　Demand Outlook:

　　1. Chinese demand is improving, but the use of scrap copper is also on the rise.

　　2. In 2017, the global demand for refined copper maintained a year-on-year growth rate of 2%, with China’s demand growing at a rate of 2.9%.

　　3. In 2017, domestic demand for refined copper was primarily driven by inventory replenishment in the air-conditioning industry and investment in the power sector.

　　4. An increase in scrap copper supply will have a certain impact on refined copper consumption.

　　5. Despite an upward revision in domestic demand, global demand has become significantly more reliant on overseas regions.

　　Supply Outlook:

　　1. Rising copper prices will support mining production;

　　2. The outlook for mine production in 2017 is trending toward improvement; although the number of mining projects yet to be developed remains limited, there are relatively many smelting projects under construction. As a result, global copper concentrate production will likely fall short of meeting the demand from newly built smelters.

　　Supply-Demand Balance and Price Forecast: With solid fundamentals, the expected rise in copper prices will lead to increased supply. It is anticipated that starting from 2019, a global supply-demand gap will emerge.