1、 Trend analysis
According to monitoring data from Business Society, copper prices rose strongly on April 8th, rising by over 2000 yuan per day to 75478.33 yuan/ton, an increase of 8.99% from the beginning of the year and a new high in nearly two years.
Duo Zhong Li Hao:
During holidays, there is a slight increase in external market sentiment
During the Qingming Festival holiday, in addition to the sharp rise in gold and silver prices, international non-ferrous metals also surged, with London copper rising 2.99%, reaching a new high in nearly a year.
Federal Reserve’s expectation of interest rate cuts
The expectation of the Federal Reserve’s interest rate cut has driven commodity prices soaring. The Federal Reserve’s March interest rate meeting, while keeping the federal funds rate unchanged, once again clarified that interest rates are currently at the peak of this cycle and are expected to cut rates this year. The Federal Reserve has hinted at three rate cuts this year. Under the continuous stimulation of interest rate cuts, prices of commodities such as crude oil, gold, and non-ferrous metals have also continued to strengthen.
Macro data is good
In March, China’s manufacturing PMI rebounded beyond expectations, with the Purchasing Managers Index (PMI) of 50.8%, an increase of 1.7 percentage points from the previous month, above the critical point, indicating a rebound in the manufacturing industry’s prosperity; In non manufacturing business activities, the PMI of the construction industry was 56.2%, an increase of 2.7 percentage points from the previous month; The PMI of the service industry was 52.4%, an increase of 1.4 percentage points from the previous month. Verifying that the economy is stable and improving, the demand side is expected to rise, and with the performance disclosure period in April, some cyclical products in the bottom or upward range of the business cycle are receiving market attention, driving the overall upward trend of the non-ferrous sector.
In March 2024, the global manufacturing PMI was 50.3%, an increase of 1.2 percentage points from the previous month, ending the 17 consecutive months of operating below 50% and returning to the expansion range of over 50%. The recovery of the manufacturing industry is expected to boost demand for industrial metals such as copper, aluminum, lead, zinc, and nickel.
AI data centers will become a new growth point for copper demand
Morgan Stanley stated in its latest report that with the rapid development of AI technology, copper demand will significantly increase, with data centers becoming a new growth point for copper demand. Da Mo wrote in the report that from 2024 to 2027, global data center demand for electricity will grow at a compound annual growth rate of 18%. The demand for copper in data centers may increase from 200000 to 500000 tons per year in 2023 to 500000 to 1.2 million tons in 2027, with a compound annual growth rate of 26%.
By 2027, data center demand for copper may account for 3.3% of global copper demand (compared to only 5.2% for electric vehicles), which will drive up copper prices and have a profound impact on the global copper market.
Fundamentals:
Supply side: With domestic smelting enterprises starting maintenance in April, capacity release is restricted, and copper processing fees have not stopped falling. There may be additional production cuts in the future, which further raises market concerns about supply shortages.
On the demand side, terminal consumption continues to rebound, and the overall recovery expectation for the peak season of the “Silver Fourth” is gradually increasing. Among them, the cumulative investment growth rate of the power grid is at a neutral position in the same period of history, with a significant increase in both domestic and export production of air conditioners, which is expected to drive the rapid repair of demand for copper rods and pipes. At the same time, the restructuring of overseas supply chains has brought about a huge incremental market, and demand will continue to improve.
LME copper inventory slightly decreased
According to the above chart, LME copper inventories have slightly declined recently. As of the 8th, LME copper inventory was 115525 tons, a decrease of 34.79% from 165700 tons at the beginning of the year.
Comparison chart of annual copper prices
According to the annual price comparison chart of copper, the trend of copper prices in April has mostly improved in the past five years.
Future Market Forecast:
Goldman Sachs believes that the copper market is at an important seasonal turning point, and the refined copper market will gradually lower inventory levels in the second quarter. In the context of strong demand and continuous supply constraints in China, the copper market will gradually shift towards a supply shortage pattern. The sustained supply shortage will support copper prices, and it is expected that copper will rise to $10000 per ton by the end of 2024!
On the whole, although the US non farm data in March showed a bright rise, driving the US dollar and US bond yields to rise and inhibiting copper prices, the domestic manufacturing PMI data in March was good, the copper supply side was reduced, and the demand was strong. In particular, the AI data center will become a new growth point of copper demand, just like injecting a “shot in the arm” into the copper market, climbing the historical peak like a flying eagle. Later, with the landing of special bonds, additional treasury bond, ultra long term special treasury bond, PSL and other broad financial instruments, domestic demand is expected to continue to improve. Goldman Sachs expects copper to rise to $10000 per ton by the end of 2024, which means there is still 7% room for copper prices to rise. It is expected that copper prices will remain strong in the short term.
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