Copper stocks fell by 16% on the three major exchanges

China Securities News, after entering the off-season consumption, the global copper stocks did not increase. Since the beginning of June, Shanghai copper (53360,750.00, 1.43%) inventory has fallen by 4.6%, LME inventory has dropped by 16.8%, and COMEX inventory has dropped by 46.9%, resulting in a 16% drop in the copper stocks of the three major exchanges.

The decline in global copper stocks is inextricably linked to the increase in imports from China, the world’s largest copper consumer. According to the latest statistics provided by the General Administration of Customs of China, refined copper imports increased by 15% to 291,846 tons in July, which is the highest level of imports since last September and 5% higher than that in June. Since June of this year, due to the large increase in imports, the import premium has climbed to US$202.50 per ton in July, setting a record high for the past year.

There are two main reasons for the dramatic increase in copper imports in China: First, the ratio of domestic imports resumed in early June. Since August 2011, trading companies have re-imported opportunities to drive the rapid recovery of copper imports. Since the import-to-port cycle generally lasts for 3-5 months, it can be predicted that China's copper imports will continue to maintain positive growth in the next four months. Second, domestic demand for terminals began to rise. Affected by the high temperature and intense heat, July and August are the traditional off-season consumption. Domestic terminal production and operation activities have been reduced, and smelters have stopped production for maintenance. However, this year, terminal demand does not drop back. As a link connecting the upstream and the terminal, copper production increased by 23.25% and 22.79% year-on-year in June and July, respectively, and the continuous growth rate reached its highest level since August 2011. As the wire and cable industry with large copper consumption, the cumulative growth of main business revenue in June was 11.78% year-on-year, and the overall industry conditions were generally better than market expectations.

The signs of a pick-up in China’s economy have consolidated the rise in copper prices. In July, the final value of the HSBC China Manufacturing Purchasing Managers Index was 50.1, which was the highest in 11 months after hitting a new 11-month low in July. The year-on-year growth rate of China's PPI in July was 2.7%, and the year-on-year growth of PPI was - At 2.27%, the year-on-year growth of PPI clearly rebounded from the previous period. From the ring data, CPI growth rate was 0.1%, PPI ring growth rate was -0.3%, compared with -0.55% rebound in the previous period, showing that the decline in the price trend in the industrial sector began to slow down, business production and business environment has improved.

The steady improvement in demand kept the copper spot premium at 250 yuan/ton, and the copper concentrate processing fee was 80 dollars/ton, which was the highest level in the past two years. Smelter profits increased, and raw material purchases grew rapidly. In August, China’s copper concentrate imports reached 938,500 tons, a year-on-year increase of 35.13%, setting a record high. Due to the recent boom in mineral investment, the global supply of copper concentrates has grown faster than consumption growth, raw material costs have declined, and companies are eager to purchase and produce. In July, the growth rate of refined copper production in China reached 11.24% year-on-year. Despite the impact of shortage of scrap copper raw materials, the smelting capacity utilization rate remained high.

Under the dual benefits of declining inventories and a rising Chinese economy, copper prices have continued to rise in the short term. However, emerging market countries have recently been plagued by the currency devaluation brought about by the Fed's reduction of QE. The possible negative impact of the Fed's exit from QE on the domestic market also needs to be vigilant.