1、 Trend analysis

According to the monitoring data of the business community, the copper price rose and fell in November. At the beginning of the month, the copper price was 64376.67 yuan/ton. At the end of the month, the copper price rose to 64906.67 yuan/ton, an overall increase of 0.82%, down 9.39% year on year. The main reason is that the Federal Reserve is expected to slow down the pace of interest rate increase. The weakening of the dollar index and tight fundamentals resonate with strong copper prices. However, many weak economic data suggest that economic growth is slowing down, and copper prices have been under pressure since mid month.

According to the current chart of business futures, the spot price of copper was higher than the futures price in November, and the main contract was the expected price two months later. Near the end of the month, the main basis difference becomes larger, which is bad for buying hedging.

According to LME inventory, LME copper inventory rose after falling in November, just opposite to the copper price in November and lower than the overall inventory in October.

Macro: In November, the minutes of the Federal Reserve meeting showed that most Fed officials supported slowing down the pace of interest rate increase. The quarterly adjusted annual CPI rate of the United States recorded 7.7% at the end of October, and fell back to below 8% again seven months later, the smallest increase since January 2022; The quarterly core CPI annual rate recorded 6.3%, lower than the expected 6.50%. The final annual rate of CPI in the euro area in October recorded 10.6%, a record high. Data released by the People’s Bank of China on October 10 showed that the increase in social financing scale in October 2022 was 907.9 billion yuan, 709.7 billion yuan less than the same period last year.

In terms of supply: the domestic refined copper output has maintained a steady growth. In October, the refined copper output increased by 10.90% year on year. From the partial overhaul of domestic smelters in November, the output growth has slowed down. Affected by exchange rate fluctuations and reduced overseas supply, the marginal decline of domestic copper related imports.

Demand: The overall demand is weak, and the growth rate of investment in power infrastructure has dropped significantly. From January to October, the investment in power grid has increased by 3% year-on-year, 6.1 percentage points lower than that from January to September. In terms of real estate, real estate investment from January to October decreased by 8.80% year on year, 0.8 percentage points lower than that from January to September. In terms of household appliances, from January to October, the cumulative year-on-year changes in the output of domestic major household appliances appeared differentiation, and the monthly data of air conditioners, refrigerators and freezers declined in an all-round way, but the washing machines grew on a month on month basis. In terms of automobiles, the growth rate in October declined significantly, and the year-on-year growth rate of passenger cars dropped significantly to 7.40%, with a cumulative year-on-year growth rate of 2.70%.

To sum up, China will cut its reserve ratio by 0.25% to release liquidity and support copper prices with policies of multiple real estate initiatives. However, higher profits of smelters will increase production capacity. There is still expectation for incremental release before the end of the year. In addition, the severe and complex domestic epidemic situation is worrying, making supply and demand weak. The trend of copper prices will not be optimistic. It is expected that copper prices will fluctuate and weaken in December.