The price drop storm is coming! Copper, thread, and iron ore plummeted across the board!
　　
　　 As of August 16, China’s electrolytic copper stocks were 159,500 tons, which was at a relatively low level in the same period in history. In the off-season cycle, low inventories provided a certain bottom support for copper prices. Copper prices fluctuated around 70,000 yuan/ton. . Judging from the current supply and demand links, there is room for copper inventory to rebound, but the upward trend of inventory is relatively moderate, which limits the subsequent rise in copper prices.
　　
　　 Figure 1: China's social inventory of electrolytic copper
　　
　　Data source: Mysteel
　　
　　 Specifically:
　　
　　 1. The country has entered a peak period of overhaul, and the impact of the southern power limit is superimposed, and domestic output has fallen
　　
　　According to mysteel research, domestic smelters were undergoing more maintenance in July and August, and domestic output dropped significantly. In addition to the impact of some regular maintenance, the southern region is again facing the impact of power cuts, and the smelting enterprises in Guangxi are affected by power restrictions. The original maintenance plan has been advanced, and the number of companies' shipments has dropped sharply, even making regional supply shortages in the south. As of the publication, there is still no clear plan to lift the electricity curtailment, and the domestic refined copper output still has a downward trend in the short term.
　　
　　 Table 1: 2021 China smelting enterprise maintenance statistics table
　　
　　Data source: Mysteel
　　
　　 2. The import profit window opens, and imported copper continues to flow in
　　
In the first half of the year, the domestic import profit window continued to be inverted. After entering mid-July, the domestic import profit window turned losses into profits, and imported copper began to flow into the market; especially for some small and medium-sized traders, the number of customs clearance continued to decline rapidly in the first half of the year. With the opening of the import window, goods in the bonded area began to clear customs and flow into the country, accelerating the decline of inventory in the bonded area. However, from the perspective of the domestic market, not all of the imported copper sources flow into the domestic spot inventory, and part of the sources flow directly to the downstream processing links, so the rebound of domestic inventories is relatively slow.
　　
　　 Figure 2: Imported copper break-even
　　
　　Data source: Mysteel
　　
　　 It is worth mentioning that in the early stage, some domestic refineries were forwarded to the bonded area due to unsatisfactory domestic consumption. With the opening of this import window, such sources of goods have also returned to the country.
　　
　　 3. Throwing storage sources and picking up goods are slow, and historical inventory quality is not high
　　
As of the date of publication, the total amount of domestic electrolytic copper storage is 50,000 tons, but recently affected by the domestic epidemic counterattack, the storage and delivery speed of North China and Hunan has been slow. Therefore, although the supply has entered the hands of processing companies, it is difficult to enter production for a while Link. At the same time, in addition to the pick-up problem for the second batch of discarded storage sources, feedback from users who have recently picked up the goods, this time the source has more products from the 90s, and the quality of the products has been significantly reduced due to the long storage time. This is caused by copper rust. The high content of oxygen and iron is not suitable for some copper products.
　　
　　 Figure 3: Distribution of the first and second batch of national copper reserves in 2021
　　
　　Data source: National Reserve Bureau
　　
　　 From the perspective of the recent two batches of dumped storage sources, the total supply of 50,000 tons is lower than market expectations, which has limited pressure on the market's bullish sentiment. At the same time, the recent copper price trend has gradually stabilized, and the quantity of subsequent dumping reserves may be flat or reduced, and the pressure on copper prices may gradually weaken.
　　
　　4. The substitution effect of refined waste is weakening, and the long-term supply of scrap copper is still tight
　　
The substitution of refined waste on the consumer side is gradually weakening. According to Mysteel statistics, the difference in refined waste in mainstream areas in China has fallen below the threshold of 1,000 yuan from 3,000 yuan/ton at the beginning of the year. The economic benefits of scrap copper are shrinking, and the market is gradually shifting to refined copper consumption. .
　　
　　 Figure 4: China's main areas of fine waste
　　
　　Data source: Mysteel
　　
　　There are several main factors for the reduction of fine scrap: First, the weakening of copper prices has made some scrap copper merchants who stocked up early start to reluctantly sell them, and the sellers have controlled the shipments and the market circulation supply is in a tight situation;
　　
Second, overseas epidemics have counterattacked. At present, the main domestic copper scrap importing countries such as Malaysia and Japan have seen obvious counterattacks against the domestic epidemics in these countries, and some countries have even begun blockades. This is very detrimental to the domestic imported copper scrap supply. Subsequent replenishment of imported sources is relatively difficult. Therefore, the tight situation of subsequent scrap copper will continue in the short term, which is good for refined copper consumption.
　　
　　 Figure 5: Trends of newly diagnosed new crowns in some countries
　　
　　Data source: Internet
　　
　　 5. The off-season is not short, the domestic regional epidemic counters, and the impact on the consumer side is limited
　　
According to Mysteel survey, 52 refined copper rod sample enterprises (the total production capacity of the sample is 12.7 million tons), the national refined copper rod production in July was 728,600 tons, an increase of 3.7% from the previous month and a year-on-year increase of 4.7%; The rod capacity utilization rate was 63.46%, an increase of 3.7% month-on-month and a year-on-year decrease of 1.7%. Statistics of 36 sample enterprises of recycled copper rods (the total production capacity of the sample is 4.15 million tons). In July 2021, the output of recycled copper rods was 197,900 tons, a decrease of 6.96% month-on-month and a year-on-year decrease of 0.35%; capacity utilization of recycled copper rods in July 2021 The rate was 57.22%, a month-on-month decrease of 6.96% and a year-on-year decrease of 21.8%.
　　
　　 Figure 6: 2019-2021 China's refined copper rod production capacity utilization rate
　　
　　Data source: Mysteel
　　
　　
　　Data source: Mysteel
　　
　　 From the perspective of the performance of copper rod companies, the performance of domestic refined copper rods has rebounded, which is consistent with the current performance of domestic refined scrap price differences, which is higher than market expectations in the off-season. From a regional point of view, the rebound in Jiangsu is more obvious. Although Jiangsu has responded to the epidemic since July, according to market feedback, the production of regional enterprises has little impact. The transportation link has more impact on freight and long-distance transportation. There is no significant impact on short-term consumption for the time being; follow-up regional epidemic progress still needs to be paid attention to.