The second auction of the State Reserve began this morning. It is reported that the initial auctions were in the Hebei and Zhejiang bids. According to the participants, the high transaction prices were 18,474 and 18,610 yuan/ton respectively.
The second batch of storage is coming. How long is the “oxtail” of commodities?
Although the country has already carried out batch dumping of reserves before, but in the context of abundant international liquidity and strong demand, it is still difficult for commodity prices to cool down. Now that the second round of stock dumping is coming soon, the market is concerned about how long is the tail of the commodity bull market after this dumping of reserves?
Most of the people interviewed by financial institutions believe that the commodity bull market has come to an end, and the second half of the year will be dominated by range fluctuations. However, in view of factors such as power shortages and limited production capacity under the influence of factors such as emission reductions, the kinetic energy of aluminum may be stronger than copper.
Commodities enter a period of shock in the second half of the year
In order to maintain the supply of bulk commodities and stabilize prices, the National Development and Reform Commission and the National Bureau of Grain and Material Reserves have decided to put into the national reserve copper, aluminum and zinc in batches. Following the release of 20,000 tons of national reserves of copper, 50,000 tons of aluminum, and 30,000 tons of zinc on July 5, the second batch of national reserves of 30,000 tons of copper, 90,000 tons of aluminum and 50,000 tons of zinc will be released in late July.
Previously, the round of dumping of reserves coincided with the period of rising global commodity prices, and downstream pressures intensified. For a time, LME copper hit an all-time high of US$10,700/ton in May. Shanghai Nonferrous Metals (SMM) analyst Zhu Ruoyan previously told Caijing that, judging from the market feedback at the time, the round-selling reserve was lower than expected. After the news was released on June 23, the disk showed a “bad landing.”
According to an announcement on the bidding platform operated by the state-owned China North Industries Corporation (Norinco), the aluminum was divided into about 200 auctions when it was dumped and stored. Only manufacturers and processors were allowed to bid, and the names of buyers were not announced. After the round of storage, the prices of bulk commodities copper and aluminum have indeed undergone an adjustment.
However, with the news of China’s RRR cut, commodity prices are once again supported, and a large amount of overseas liquidity is also playing a supporting role. As of 11:40 on July 23, Beijing time, the price of LME LME copper was reported at US$9,512/ton; the price of LME aluminum was reported at US$2,479/ton.
For the forthcoming second round of reserve dumping, Huatai Futures said that on Monday, zinc prices were weak and fluctuating, and the newly released inventory data showed that zinc ingots were still destocking. Overlapping the upcoming second round of reserve dumping, the market has a strong wait-and-see mood.
The current consensus in the market is that the commodity bull market is coming to an end, and it is difficult to repeat the market that has risen by more than 100%. The second half of the year is more of a range-bound market.
Wu Zhaoyin, director of macro strategy at AVIC Trust, also told reporters earlier that there is still room for growth in U.S. pricing of crude oil, copper, aluminum, lead, zinc and other basic metals, as well as corn and soybean meal and other agricultural products. Supply, demand and currency factors are still more conducive to the rise, but the rise is also Entering the tail stage, there is not much room for follow-up.
Aluminium price momentum is still stronger than copper
It is worth mentioning that there are still differences in the fundamentals between different varieties. In comparison, aluminum is currently considered to have stronger kinetic energy.
Copper and aluminum are undoubtedly the two major commodities that have attracted attention this year. The former is driven by good global liquidity and demand recovery, while the latter has increased prices due to factors such as capacity reduction and power curtailment. As of July 22, compared with the low point in April 2020, LME LME aluminum has increased by nearly 70%; compared to the low point in March last year, LME LME copper has increased by more than 116%.
Since the beginning of this year, the surge in copper prices has indeed caused pressure on downstream companies. “Some downstream companies are facing the problem of losing money when they receive orders, and many downstream companies are also facing the issue of the payment period. For some companies that have difficulty financing or insufficient cash flow, the sharp increase in copper prices has also increased corporate funds. Pressure and production and operation pressure.” Antaike engineer and copper expert He Xiaohui told a financial reporter.
Goldman Sachs and other international investment banks emphasize that the price increase of copper is caused by scarcity. After all, under the “green revolution”, the demand for copper for new energy vehicles is three times that of internal combustion engine vehicles, and the investment and mining of copper mines in the past decade has been seriously insufficient. . But He Xiaohui said that the so-called “scarcity” should be viewed more rationally.
“Under the background that copper prices have risen by more than 100%, supply will naturally continue to appear, and large mines will be successively mined in the future. This year, the global mines are slow, which may also be related to the epidemic situation and the upstream desire to maintain a relatively tight supply balance. In addition, copper It is still a renewable resource. Many end-products that can be recycled have been accumulated in China, and it is not for new mines.” He predicts that it will be difficult for LME Copper to return to a record high in the middle of the year during the year, which is expected to be between US$8,800 and US$9,000 per ton. The nearby area fluctuates.
In contrast, some institutions believe that aluminum is more fundamentally supported than copper this year. Aluminum has maintained an oversupply pattern in the past many years, which has led to pressure on corporate profits. The reason for the price increase this year is that the relevant domestic departments have repeatedly emphasized that they will strictly control the “ceiling” of 45 million tons of electrolytic aluminum production capacity. Galaxy Securities pointed out that in January 2021, my country’s total electrolytic aluminum production capacity reached 42.44 million tons, which is close to the 45 million tons production red line. Therefore, electrolytic aluminum production capacity will face greater restrictions. Under the dual control of energy consumption in Inner Mongolia, electrolytic aluminum production capacity was forced to reduce production, and the total output growth of the electrolytic aluminum industry was limited. Economic recovery and new energy consumption supported the growth of electrolytic aluminum consumption. The tight balance of supply and demand in the industry is expected to support the high price of electrolytic aluminum. The price of aluminum once exceeded the 20,000 yuan/ton mark.
Although aluminum prices may still maintain high levels, Antaike Aluminum Department analyst Shen Lingyan told reporters that in the context of the country’s guarantee of supply and stable prices, the situation of substantial price increases has changed, and short-term prices are still under further pressure to fall. space.