1．News Roundup for Overseas Copper Markets

  This is a news roundup for overseas copper markets last week.

1. Australia's Newcrest Mining has reached an agreement to acquire all outstanding common stock that Premium Resources does not already own for $2.8 billion.

2. Chilean state-owned mining company Codelco said on November 9 that a landslide occurred on a slope of its Minstro Hales copper mine, but the incident did not affect the safety of workers or damage to equipment, and operations were not affected.

3. Chile's National Copper Commission Cochilco stated on November 8 that by the end of this decade, the country will receive $68.9 billion in mining investment, which is 6.9% lower than the previous forecast because two projects were removed from the pipeline.

2、Proposed Amendment to EU Waste Shipment Regulation to Affect Copper Scrap Export in Short Term

The supply of copper scrap showed signs of tightening last week. The quotations in Foshan were firm due to the tight supply of copper scrap. The supply tightness has improved compared to early October, though. The big price spread between SHFE front-month and next-month contract, combined with the small discount of copper scrap products against the most active SHFE copper contract, has depressed the consumption. And it in turn weakened the orders at the copper rod plants using copper scrap, accumulating the inventory of finished products and raw materials. Meanwhile, there were newly confirmed COVID-19 cases in Shangrao city. As such, the shipments of copper scrap were disrupted and the overall purchases weakened.

As far as SMM understands, the European Union will amend its waste shipment regulation in mid-November to prohibit the export of solid waste to third-party countries that do not meet EU standards for solid waste treatment.

China has banned the import of solid waste as early as in early 2021, and takes a neutral stance towards EU’s decisions. This has made some domestic importers to stay on the sidelines, and they have stopped their purchases from the EU for the moment. At the same time, some EU suppliers have also stopped performing orders.

Seniors in the domestic recycling field believe that EU suppliers can apply for certification and export high-quality raw materials that meet the standards in a form which matches China’s standards for the raw materials of secondary copper, rather than solid waste. However, many small and medium-sized suppliers have not been certified, and the process of re-certification will take two months. As such, the arriving shipments of scrap in China from the EU is likely to decline significantly in the next 2-3 months. Even if most of the suppliers are certified, it will be difficult for some brass scrap with low grade and high impurities to be exported.

The market shall also pay attention to whether the regulations will affect some countries in Southeast Asia with low solid waste processing capacity, thereby indirectly affecting China's copper scrap imports. Malaysia, Indonesia and the EU have all increased their solid waste treatment standards, and overseas policies generally have a trend of tightening. This is likely to hamper China’s imports of raw materials for secondary copper.

3、Copper Prices to Edge up amid Low Inventory

The October CPI in the US due last week increased by 6.2% year-on-year, the biggest increase in 31 years, and up 0.9% month-on-month, the largest gain in four months. The much higher-than-expected inflation data triggered market estimate that the Fed might raise interest rates earlier. Therefore, the US dollar index quickly moved up to 92.25, a new high since July 2020, weighing on the nonferrous metals prices.

On the other hand, China’s informal financing data topped expectations, driven by the real estate sector. Although the domestic real estate policies are still tight, the overall domestic monetary policy remains loose. And the expectations of the Fed's easing currency policy have been partially priced in, making the overall macro environment more stable. The market shall focus on the CPI reading in the UK and the Eurozone, and the speeches of the FOMC voting committees. It is expected that the overall macro environment will remain positive.

Fundamentally, the export of domestic smelters continued, and the inflow of imported copper remained at a relatively low level. At the same time, the south-east of Inner Mongolia, the central-north of Liaoning, the south of Jilin and the west of Heilongjiang have undergone blizzard since November 7. This has interrupted land transportation from north-east China to south China, keeping all the shipments of copper cathode from being delivered to south China. But the smelters maintained normal production thanks to sufficient raw materials. The land transportation to south China will gradually return to normal.

 The domestic social inventory have decreased by 12,600 mt. The backwardation structure of LME copper has gradually narrowed, and stood at $177/mt as of November 11, but it is still at a high level. The tight domestic and overseas supply will underpin copper prices in the long run.

4、Operating Rates at Copper Plate and Strip Producers Slid Further in October and Expected to Improve in November

The operating rates at copper plate/sheet and strip producers were 74.19% in October

The power rationing tightened in October following the implementation of the energy consumption control policy in September. In addition to Zhejiang, Anhui, Shandong, Guangdong and Jiangsu, Jiangxi was also included in the power rationing policy last month. Cities such as Shangrao and Yingtan where energy consumption has been high were subject to power rationing.

The impact of the power rationing in October on enterprises continued to expand. Most of the small and medium-sized enterprises reported that their production in Q4 has been hindered by high copper prices, bad weather in certain regions as well as maintenance.

Brass strip companies said that downstream consumption was relatively weak in October, mainly due to declining demand in real estate sector and export restrictions. The consumption of red copper strips was slightly better than that of brass strips, but the orders for lead frame declined amid the chip shortages. The orders for red copper strips also shrank, while orders from the electronics and power industries performed smoothly.

Raw material inventory/output ratio stood at 24.16% in October

The raw material inventory/output ratio at copper plate/sheet and strip enterprises was 24.16%, down 0.05% from the previous month.

Companies tried to make up for their losses in October due to the impact of power rationing in September. For instance, they attempted to resort to OEM from other places, so the raw material inventory has not changed much from September.

The operating rates are expected to stand at 75.51% in November

According to SMM survey, most of the copper plate/sheet and strip enterprises indicated that they were still subject to power rationing in November, but were more optimistic about the intensity of power rationing. And downstream demand is expected to rebound slightly as power rationing eased.

The operating rates at copper plate/sheet and strip producers are expected to stand at 75.51% in November, up 1.32% on the month.