Dec. 24, the largest decline in the first quarter, copper in London more than 25% , copper in Shanghai fell more than 21.6% . Subsequently, the domestic epidemic was first brought under control, economic activity gradually resumed, copper demand continued to pick up, at the same time, the overseas epidemic caused the supply disruption risk to increase, supply and demand two-way force, driving copper prices upward repair. By the end of the year, as Vaccine Research and development continued to improve, Europe launched a new round of economic stimulus program, the United States stimulus bill reached an increasingly optimistic expectations, the market atmosphere again warmed up, copper prices struggled to break up.

A the prospect of global epidemic prevention and control is worth looking forward to

Looking back to 2020, the biggest black swan on the market is undoubtedly the global outbreak of NCP. Global markets have been battered, with U.S. stocks falling sharply from record highs, touching the circuit breakers four times in just two weeks, and European stocks falling precipitously. In the second quarter, the number of new pneumonia infections worldwide was under effective control; in the third quarter, the outbreak was concentrated in South America, with economic stimulus measures in several countries beginning to take effect and the impact of the epidemic relatively weakened. Into the fourth quarter, the United States and Europe outbreak of the second, but Vaccine Research and development has made significant progress, the market more feedback vaccine prevention and control of positive emotions.

In response to the economic impact of the epidemic, the Federal Reserve cut interest rates to zero and began an unlimited program of quantitative easing, accompanied by a $2 trillion economic stimulus bill and tens of thousands of dollars in credit programs; the European Central Bank expanded its program of quantitative easing, and push negative interest rates; the People's Bank of China has repeatedly cut reserve requirements, releasing trillions of dollars of liquidity. Japan, the United Kingdom, Australia, Canada and other countries around the world announced that the central bank to increase monetary easing efforts. At the end of the year, the European Central Bank again adopted economic stimulus policy, and the US economic stimulus bill is also moving in an optimistic direction, providing support for a further recovery of the 2021 economy.

Looking ahead, the global economy will continue to be 2021 by progress in disease prevention and control. By December 2020, Pfizer and BIONTECH had obtained temporary emergency use authorisations from the UK government for the Mrna New Crown Vaccine; Two major Chinese vaccine manufacturers, Sinopharm group and Kexing Bio, are conducting phase III clinical trials of three vaccine candidates, the Beijing Institute of Biological Products and Wuhan Institute of Biological Products, both of which are owned by Sinopharm, are also conducting phase III clinical trials in several countries. The prospect of mass vaccination and eventual mass immunization against 2021, a new coronavirus vaccine, is expected to inject a shot in the arm into the global economy. If the global epidemic prevention and control progress smoothly, the global economy or full recovery, the domestic economy will show more domestic and foreign demand two-way positive momentum.

B overseas epidemic situation determines the supply pattern of copper market

The global outbreak of new crown pneumonia has disrupted the supply of copper concentrates in 2020, affecting large scale copper mines such as Oyutolgoi, Escondida and Lasbambas. At one point, the CerroVerde mining area was put under repair, and cross border shipments of goods from Zambia and other countries were suspended, the effect lasted for almost two months. Subsequently, although mine production slowly recovered from the epidemic, but the global smelting capacity continued to release increased demand, processing costs can no longer rise back to pre-epidemic levels.

In 2020, domestic scrap copper recycling links once by the epidemic impact, Southeast Asia, Europe and the United States affected by the epidemic, scrap copper enterprises shut down and led to export disruption. Later, the scrap copper dismantling plant in Southeast Asia resumed production, while the frequency of replacement of electrical appliances and automobiles slowed in Europe and the United States due to the impact of the epidemic, and the supply of scrap copper at the source of supply was tightened, even though the new solid waste law was officially introduced, a shortage of scrap copper imports continues to plague the industry.

According to the normal production schedule, 2021, the supply of additional copper concentrate will mainly come from Spence, Minajusta of Peru and Kakula-Kamoa copper mine of Congo gold, with production of copper concentrate expected to increase by 160,000 tons. Global Copper concentrate production is expected to grow by more than 2% year on year, according to the 2021, a bigger increase than the 0.45% growth forecast for 2020. It is worth noting, however, that the fallout from the 2021 outbreak will continue, and the specific impact on the supply chain of copper mines will depend to a considerable extent on the prevention and control of the outbreak and progress in immunization. Since most of the new production is concentrated in the second half of 2021, the market may again face a shortage of copper concentrate if the epidemic is not controlled and the weather cools off in South America in the second quarter.

At present, the new import policy of domestic recycled copper has been implemented, the import policy is more favorable for domestic scrap copper imports. Europe and the United States as the source of copper scrap supply, if the epidemic prevention and control and immunization made positive progress, it will help to improve the overall supply of copper scrap. 2021 is still a year of rapid releases of copper smelting capacity, with about 640,000 tonnes of new refining capacity to be added next year, according to public figures, significantly more than the 450,000 tonnes added in 2020. China copper, Tongling, Jiangxi Copper, Jinchuan and Freeport have set the unit price of 2021 copper concentrate at US $59.5 per ton, down from US $62 per ton in 2020, according to SMM. Although lower processing costs have squeezed smelter profits in recent years, high copper prices and the prospect of a strong recovery in global demand next year still make us optimistic about refined copper production next year.

C domestic and external demand is expected to pick up in both directions in the future

In 2020, the cable industry as a whole began to slow and then rise, starting in April continued to be at a high rate. Investment in power infrastructure was better than in previous years, while railway and real estate construction continued to improve since March, ensuring demand for cables. Production in the air conditioning market equalled last year's level in May and reached a high of 26.161 million units in June. On the export side, air-conditioning exports have shown a steady recovery since September. Production in the auto industry, except for a short period at the beginning of the year affected by the epidemic, began to recover gradually in April and remained stronger than in the previous two years. As a result of the sales link performance is not vulgar, since May the automobile sales volume is higher than nearly two years in the same period level, the automobile industry inventory pressure is less.

I am optimistic about the demand for copper in the 2021 power industry. In addition, the real estate industry's new construction and construction links are expected to continue in recent years of good level, and continue to provide copper demand. At present, there are about 17 million air conditioners in stock in China, roughly equivalent to the export volume of air conditioners in the second half of the normal economic environment. The production of the 2021 air conditioning industry will be mainly determined by the export strength of air conditioners. If the epidemic situation in Europe and the United States is properly controlled, the export recovery potential will be very large, thus reducing domestic inventory pressure. At present, there are less than one million cars in the domestic inventory, which is the lowest level in the last six years.

Overall, the macroeconomic environment at 2021 will be better than it has been this year. The positive effects of the previous economic stimulus policies will gradually emerge, overseas manufacturing and demand are expected to recover, and the domestic economy will show more positive momentum of both domestic and external demand. On the fundamentals, the supply side effects of next year's fallout are likely to continue, but the 2021 theme will focus on demand rather than supply. Further implementation of the stimulus policy, the recovery of overseas demand, as well as some of the copper terminal industry's own reduced pressure, will promote terminal demand acceleration. As a result, 2021 copper prices will continue the bull market.

Source: Futures Daily