Copper prices may launch spring offensive in 2013

Short-term domestic copper stocks continued to be sharply discounted and London copper stocks increased significantly on the impact of copper prices is limited, once the US financial agreement negotiated clear, copper prices continue to rise is very likely, the operation is recommended at 56500-57100 yuan / ton on the bargaining layout more than one.

In December, although the US fiscal cliff was approaching, downstream companies were in short supply due to lack of funds, but copper prices remained relatively resilient, remained at 56500-58,000 yuan/ton, and the US economy continued to improve. The Japanese government continued to implement loose monetary policies. China To further promote urbanization, investors are expected to have a good policy towards China, which is the main support factor. Considering that there will be stocking demand for Chinese companies after the spring of next year, we believe that these factors will be combined to promote the spring offensive of copper prices. At 8500-8700 US dollars / ton, Shanghai copper is roughly 62,000 yuan / ton.

It is only a matter of time before the US financial agreement is reached

Since December, during the negotiations on the financial agreement, the two parties of the United States have bargained each other and have not been able to reach an agreement. This has caused investors to worry about the US fiscal cliff issue, but in fact it may not be pessimistic. We believe that the two parties will eventually reach an agreement. Even if the worst outcome emerges, the United States has a fiscal cliff problem. The government is forced to increase the tax revenue of the people and cut back on expenditure, which is also beneficial to the sustained growth of the United States economy.

Both existing home sales and building permits both hit new highs in recent years in November, suggesting that the US housing market has greatly improved. On the evening of December 20, the US Department of Commerce announced that the revised third quarter GDP growth rate was 3.1% per annum, which was much higher than the US government's forecast of 2% at the beginning of the year, and was also higher than the MarketWatch forecast of market economists. %. This shows that the U.S. economy has continued to improve and has returned to a better historical level, which is favorable to the growth in global copper demand.

Japan still actively implements loose monetary policy

After Japan’s new Prime Minister Shinzo Abe took power, the call for continued easing of policies to stimulate the economy was very high. The Bank of Japan increased the scale of bond purchases by 10 trillion yen to 101 trillion yen on December 20, while maintaining 0-0.1%. The ultra-low rates remain unchanged. On the 23rd, Shinzo Abe once again urged the Bank of Japan to increase inflation target to 2%. We believe that in order to stimulate the economy, the Japanese government will still step up efforts to implement loose monetary policy.

China further promotes urbanization

In mid-December, the Central Economic Work Conference revisited urbanization. According to the first draft of the “Plan for Promoting the Healthy Development of Urbanization (2011-2020)” prepared by the National Development and Reform Commission, the plan anticipates that urbanization will drive 40 trillion yuan of investment in the next decade, which is very favorable for improving the demand outlook for copper. For the March of the next year in March and the traditional peak season of Chinese consumption, investors also have greater expectations: on the one hand, because China’s economic reform prospects are more optimistic, while China’s policies are likely to be further relaxed; on the other hand, the country is the Spring Festival. After the opening of the trade unions in the downstream, the company has demand for stocking in advance. The Chinese factor is an important reason for the firmness of copper prices.

Taken together, we believe that the short-term domestic copper spot market continues to be sharply discounted and London's copper inventories continue to increase significantly. The impact on copper prices is limited. Once the US financial agreement is negotiated, there is a high possibility that copper prices will continue to rise. Operational recommendations are made at 56500-57100. Yuan/ton bargaining layout more than a single, patiently waiting for the Shanghai copper spring offensive.