On a macro level, the People’s Bank of China has decided to reduce the reserve requirement ratio for financial institutions by 0.25 percentage points on December 5,2022. The RRR cut reflects the forward-looking nature of monetary policy, and highlights the strategic focus of monetary policy, which is conducive to stabilizing market expectations, and has an important policy significance. Specific to the non-ferrous market, the author believes that the RRR cut to boost or limited, take copper and aluminum as an example, its trend will still return to the fundamental dominant.
Copper market, the current global copper concentrate supply is relatively abundant, processing fee index continued to climb momentum. Recently, the transaction activity of copper concentrate spot market has rebounded, and the end of Benchmark landing in 2023 has a certain guiding role on the later spot procurement of smelter. On November 24, Jiangxi Copper, China Copper, Tongling Nonferrous Metals and Jinchuan Group and Freeport finalized the long single processing fee of copper concentrate Benchmark at $88 / ton and 8.8 cents / pound, up 35% from 2022 and the highest value since 2017.
From the domestic electrolytic copper production situation, there were five electrolytic copper smelters overhaul in November, compared with October, the impact has increased. At the same time, due to the tight supply of crude copper and cold material and the slow landing of new production, the electrolytic copper production in November is expected to be 903,300 tons, up only by 0.23% month on month, up by 10.24%. In December, smelters are expected to push refined copper production up to mid-year highs under a rush schedule.
Aluminium profile manufacturers in china rebounded slightly. Recently, the operating capacity of the electrolytic aluminum profile in Sichuan has been slightly repaired, but due to the power shortage in the dry season, it is expected to be more difficult for the full production by the end of this year. Driven by the encouraging policies announced by Guangxi, the Guangxi electrolytic aluminum resumption project is expected to accelerate; the production reduction of 80,000 tons in Henan is completed, and the resumption time is not determined; the new production progress in Guizhou and Inner Mongolia has not reached the expectations. In general, under the influence of both increase and decrease, the domestic electrolytic aluminum operating capacity presents a narrow range fluctuation situation. Domestic electrolytic aluminum operating production capacity is expected to recover to 40.51 million tons in November, but there is still a certain gap compared with the previously expected annual production capacity of 41 million tons.
At the same time, the domestic aluminum downstream processing enterprises start performance is mainly weak. As of November 24, the weekly operating rate of aluminum profile enterprises was 65.8%, down 2% from the previous week. Affected by weak downstream demand, reduced orders, aluminum profile, aluminium profiles for windows and doors ,solar panel mounting rack，aluminum foil enterprises operating rate fell last week. Although the operating rate of aluminum strip and aluminum cable is temporarily in a stable state, but does not rule out the later production may appear. Combined with the inventory, as of November 24, the domestic electrolytic aluminum social inventory was 518,000 tons, continuing the inventory decline situation since October. The author believes that the social inventory is not driven by the consumer end, but caused by poor transportation and delayed arrival of aluminum factory products. The road and factory inventory will still bring potential accumulation pressure to the aluminum market in the later period.
In terms of end demand, from January to October, the investment in national power grid projects reached 351.1 billion yuan, up 3% year on year. In October, the investment in power grid was 35.7 billion yuan, down 30.9% year on year and down 26.7% month on month. From the operation of the wire and cable industry, with the approaching of the seasonal off-season, cable orders have declined, and the later stock volume will gradually reduce. The operating rate of wire and cable enterprises in November is expected to be 80.6%, down 0.44% month-on-month, and down 5.49% year-on-year. On the one hand, while the domestic end demand is impacted, the logistics and transportation block also delayed the delivery and procurement time. Under this background, the production progress of the cable industry is slowed down; on the other hand, the cable enterprises face capital pressure at the end of the year, reducing the demand for copper and aluminum.
In October, the domestic automobile production and sales showed a situation of both ice and fire, and the traditional fuel vehicles declined significantly, while the new energy vehicles showed a rapid development momentum, even hitting a record high. Although the pressure on the terminal market caused the automobile supply in October to decline slightly compared with September, the automobile production and sales trend in October still grew year-on-year due to the continuous force of the vehicle purchase tax reduction policy. China is expected to reach 27 million vehicles this year, up about 3 percent year on year. For next year, whether the continuation of the traditional fuel vehicle purchase tax preferential policy has not yet been determined, and the new energy vehicle subsidies will be launched soon, so there is still a certain uncertainty in the market expectations.
In general, in the macro pressure is still there, the market supply and demand contradiction easing background, it is expected that copper and aluminum will be based on the range of oscillation market in the near future. The support below the Shanghai copper main contract is 64200 yuan / ton, the upper pressure is 67000 yuan / ton; the Shanghai aluminum main contract is 18200 yuan / ton, and the upper pressure is 19250 yuan / ton.
Post time: Nov-29-2022
