"The Belt and Road" helps copper turn over?



In 2015, when the fundamentals are still difficult to reverse, the launch of the Belt and Road strategy seems to bring the dawn of copper's turnaround - can the strategy of power construction output activate the copper market?

Copper price recovery

Data show that the largest decline in copper markets at home and abroad in early 2015 approached 15%, but since the end of January, copper prices have rebounded sharply. So far, copper prices have rebounded by 10%, of which the LME copper price has returned to around $6,000, and the domestic copper price has also returned to around 43,000 yuan.

The reason is that in terms of demand, the poor performance of the downstream industry is the dominant factor. According to the data of Aowei Cloud, at the beginning of 2015, the two downstream copper consumption industries of air conditioners and cables experienced a huge year-on-year decline.

However, history is always worth learning from. As in the past 2 years, economic weakness and excess copper fundamentals are always the main reasons for the sharp drop in copper prices at the beginning of the year. However, as the government's policies to stabilize growth are successively introduced, copper prices will usher in a recovery.

After the copper price plummeted in early 2015, the launch of QE in the euro area and the reduction of China's deposit reserve have once again injected vitality into copper.

On the supply side, due to the fall in copper prices at the beginning of the year, the spread of panic has led to the occurrence of smelters maintenance and production cuts, and the supply of scrap copper has been stopped.

Changes in LME positions also confirmed the recovery of investment sentiment. On March 11, London copper continued to increase its positions by 3,000 to 348,000, which was at a historically high level.

fight for pricing power

At present, China is the world's largest metal consumer, with a copper demand of more than 8 million tons per year, accounting for nearly half of the world's total copper consumption.

Like iron ore, China's copper is highly dependent on foreign countries, and half of it is imported. However, China does not have global trading products, trading markets and delivery warehouses, which directly leads us to be very passive in terms of pricing power.

Yang Li, vice president of Jiangsu Dayuan Yintai Precious Metals Spot Electronic Trading Market, said that the establishment of commodity delivery warehouses is extremely important for the development of China's commodity market and for the right to price commodities.

Internally, the establishment of the delivery warehouse will provide a safer guarantee for the consumption of bulk commodities in China. Since China is the world's largest metal consumer, when there is a global oversupply of bulk commodities, it will choose to ship to warehouses in China as much as possible, and when domestic demand is in short supply, it can also purchase from nearby warehouses in China. As a result, the transaction costs of many metals will be greatly reduced.

Externally, the implementation of the “One Belt, One Road” strategy in 2015 is bound to drive the export of infrastructure capacity. Among them, the laying of electric power, railways and other facilities will bring a large amount of copper demand, and China's own commodity exchanges and delivery warehouses will greatly reduce export costs and shorten the time and distance between countries along the route and my country.

Once a copper exchange such as the LME is built, spot trading, bank pledge financing and insurance allocation services around copper will become more mature, and the prosperity of the market will also be conducive to the competition for international pricing power, further enhancing the market for copper in China. position in the global commodity pricing system.

Benefit from power investment

On February 7, 2014, the joint venture formed by State Grid [Weibo] and Brazil's National Electricity Company with a shareholding ratio of 51:49 successfully won the bid for the beautiful mountain hydropower UHVDC transmission project in Brazil.

State Grid's 2015 investment plan shows that the company's grid investment in 2015 will reach 420.2 billion yuan, compared with 338.5 billion yuan in 2014, a year-on-year increase of 24%.

Among them, UHV investment is regarded as the key point. In 2015, the company plans to approve the construction of a total of 14 UHV lines.

The heavy investment of State Grid will undoubtedly benefit the increase in copper demand. Data show that in 2014, China's refined copper consumption was about 8.7 million tons, nearly half of which was used in the power sector. Antaike Consulting believes that State Grid's investment plan will stimulate copper demand growth of 8.7%.

Citi analyst Ivan Szpakowski also said that China is the largest copper demander, and State Grid is the country's largest power grid operator and the world's largest copper consumer. The company's copper demand accounts for about 16% of the world's total. Large-scale investment in grid construction clearly sent a signal of rising copper demand in 2015.

Therefore, Citi predicts that the copper price will rise from about $5,700 per ton at present to about $7,000 per ton in the second half of the year.

RRelated news