Weak dollar logic dominates metal price inverse correlation regression

July 13, 2023

Investment points

â—†Market review

Last week, the closing price of the Shanghai-March copper March contract was divided. The Shanghai copper three-day closing price fell 100 yuan to 52,950 yuan / ton, a decrease of 0.19%. The price of the three copper prices rose by 142 US dollars to 6,846 US dollars / ton, an increase of 2.12%. The price of the main contract of Hulun Copper reached a new high in the year. In the first half of the week, the data was relatively light, and copper prices remained at a high level. The US ADP employment data and GDP estimates released on Wednesday night exceeded expectations, causing the dollar to bottom out, suppressing non-ferrous metals, and the domestic manufacturing PMI announced on Thursday. Exceeding expectations pushed up the price of copper and then fell back. On Friday, copper prices followed the ferrous metal news to stimulate the rebound. Overall, copper prices remained high and volatile this week.

On the macro level, domestic official manufacturing PMI and Caixin manufacturing PMI both exceeded expectations, indicating that the domestic economy is stable and the pattern remains unchanged; the US second quarter GDP growth rate is revised, better than expected, ADP employment data exceeded expectations, making Wednesday's US dollar There has been a rebound. However, the weak core US PCE and wage growth and the lower-than-expected non-agricultural data released on Friday night made the Fedâ€™s probability of raising interest rates lower in December. The Eurozoneâ€™s August CPI rose to the highest in four months, core inflation. Still "drag down".

In terms of industry, the National Development and Reform Commission: China's ten non-ferrous metals production in July increased by zero year-on-year; Mexico's June copper output increased by 8.6% year-on-year, lead production increased by 14.0%; South African power supplier CEC will resume power supply to Glencore's Mopani copper mine; WBMS: Global copper mine production in the first half of 2017 fell by 0.1% year-on-year; Indonesia hopes that the Freeport Grans copper mine ownership transfer can be completed in one time; the world's top ten copper mines in the first half of the year decreased by 11.7% year-on-year only two years; Indonesia has been with Freeport Agree on the new mining license for the world's second largest copper mine.

In terms of funds, in the week of August 25, the LME copper management fund's net position increased slightly by 2.72%, the shorts replenished 858 lots, and the long positions opened 1,177 lots. The overall bullishness, the management fund's net position reached a new high since December last year. Net positions have continued to increase since mid-July this year; on August 29th, the CFTC non-commercial net positions rose sharply, 6.87%, for eight consecutive weeks, non-commercial long positions opened 1,647 lots, short positions closed 1 , 159 hands, overall bullish. In the previous week, the number of positions held in the previous period decreased slightly by 5.90%, and the volume of transactions decreased by 23.46%. The differences in the field have intensified, and the fear is high.

In terms of inventory, global dominant inventories fell by 3.19% this week, with LME inventories falling by 17,325 tons, a decrease of 7.19%, SHFE inventories falling by 3,862, a decrease of 2.06%, and COMEX inventories rising by 2,311 tons, or 1.41%. This week, the global decline in the rate of decline has slowed down. The proportion of LME cancelled warehouse receipts has declined, but it is still at a high level, and recorded 49% on Friday. In terms of regions, North American inventories increased by 26.34%, mainly due to the increase in LME warehouse stocks in New Orleans, USA. Inventories of the Shanghai Free Trade Zone rose by 2.64% this week and recorded 504,700 tons on Friday.

In terms of spot, the price difference of refined copper was up by 4.39% from last week. The price difference of refined copper reached a new high since January, and the replacement effect of scrap copper was significantly enhanced. The premium of Yangshan copper rose first and then fell, and it recorded US$66 on Friday. Tons, Shanghai Electrolytic Copper CIF bill of lading averaged a flat premium; the Yangtze River non-ferrous average premium premium continued to rise during the week, recording 40 yuan / ton on Friday, indicating that spot demand has increased. The Shanghai copper base gap dropped by 58.97% from last week. Lun Copper's premium (0-3) rose slightly by 2.70% from last week. The term spread has been expanded.

â—† Investment advice

Next week, China will focus on the August trade balance, CPI, PP I, the United States will focus on the speech of the Fed officials, the new manufacturing orders in July, the non-manufacturing PMI in August, the trade balance in July, the Beige Book of the Fedâ€™s economic situation, etc. Data, the EU focuses on the euro zone PPI, the European Central Bank announced interest rate resolutions.

Although the US second-quarter GDP revision data and ADP employment data exceeded expectations this week, the US dollar index hit a new low of 91.62 and rebounded strongly. However, the US core PCE price index released this week was less than expected, which led to a limited rebound in the US dollar. The US announced on Friday night. After the non-agricultural data fell short of expectations, the US dollar index fell quickly after the cliff-type plunge. This week, the US dollar index successfully held the support line of 92.5, showing signs of a bottoming out of the dollar. The US Treasury Secretary believes that the short-term weakness of the US dollar is conducive to the US economic and trade situation, but the good momentum based on the US economic recovery is still long-term bullish.

Morgan Stanley analysts recently pointed out in the report that the typical inverse correlation between the dollar and the metal is back, meaning that metal prices are vulnerable to the rebound of the dollar. In the months following Trumpâ€™s election as president of the United States, the two sides went up, when the marketâ€™s optimism about Trumpâ€™s tax reform and infrastructure plan was high, but with the Trump agendaâ€™s pause, only the dollar weakened. Keep metal prices such as copper, aluminum and lead at a high level.

Under the core logic of the weak dollar, copper prices are expected to remain high and volatile in the absence of unexpected events on the supply and demand side next week.

Macro news

1. China's August Caixin Manufacturing PMI hit a new high in manufacturing industry since February

SMM News: The August Caixin China Manufacturing Purchasing Managers Index (PMI), released today, was the highest since February. China's August financial new manufacturing PMI 51.6, higher than expected 51 and the previous value of 51.1. This trend is consistent with the National Bureau of Statistics manufacturing PMI. In August, the Bureau of Statistics' manufacturing PMI recorded 51.7, up 0.3 percentage points from July. However, from the breakdown of the sub-data, there is a big difference between the two manufacturing PMIs: In the new manufacturing PMI of Caixin, the new order index and the new export order index recorded a new high of 37 months and March 2010, respectively. There was a slight decline, the employment index rose slightly in the contraction interval, the finished goods inventory index fell for the third consecutive month, and the purchasing inventory increased slightly in the expansion range. In the manufacturing PMI of the Bureau of Statistics, the production index and the new order index both fell from the downside. The new export order index fell for two consecutive months, and the raw material inventory index, finished goods inventory index and employment index continued to fall in the contraction interval.

2. The central bank cuts the peak and fills the valley to maintain a stable liquidity market.

After the â€œtwo days of asking for moneyâ€ in the first two days, the funds on the last day of August finally passed smoothly. With the end of fiscal expenditure increased support, the tension eased financial side, topped more than two-year high of 601,229 Shanghai Bank, the examination room shares Interbank Offered Rate (Shibor) overnight interest rates also fell sharply the day 9.27 basis points , reported 2.8310%. Looking forward to September, the comprehensive amount of inter-bank deposit receipts, the end of the quarter macro-prudential assessment (MPA) assessment, monthly tax payment and other multi-perturbation factors, the funds are not optimistic. Market expectations for funding are also shifting from â€œwiderâ€ to â€œtighterâ€ in the middle of the year, and market sentiment may become more cautious.

3. The lowest growth rate since December 2015! US core PCE price index rose by 1.4% year-on-year in July

SMM Information: Data released on Thursday showed that the US core PCE price index fell by 1.4% in July to the lowest level since December 2015. The core PCE price index in July was 0.1%, unchanged from the previous and expected. US July PCE price index was 1.4% year-on-year, unchanged expectations and previous value; July PCE price index was 0.1%, which was flat and expected to be better than the previous value of 0.0%. Personal consumption spending rose less than expected in July, and the Fedâ€™s favored inflation indicator, the core PCE price index, fell to its lowest level in December 2015, indicating that inflation remains low, which may strengthen the marketâ€™s delay for the Fed to be until December. After the expectation of raising interest rates. After the data was released, the USD/JPY was rapidly lower in the short-term; spot gold quickly rose higher and rose above the $1,310/oz mark; the 10-year US Treasury yield was lower.

4. Eurozone's August CPI rose to 4 months, and the highest core inflation is still â€œboringâ€

SMM News: Eurozone August inflation data is the highest in four months, which may increase market expectations that the ECB will begin to withdraw from loose monetary policy. On August 31, the Eurostat released data showing that the euro zone's August CPI was 1.5% year-on-year, up from 1.3% in July and higher than the expected 1.4%. The core CPI for the Eurozone in August was 1.2% year-on-year, unchanged from expectations and July. In terms of inflation, energy prices rose by up to 4.0% in August, up from 2.2% in July. Service prices followed closely, rising 1.6%, and food and tobacco and alcohol prices rose 1.4%. In addition, non-energy industrial products have the lowest price increase of 0.5%. Another data released on the same day showed that the unemployment rate in the euro zone in July was 9.1%, which was the same as the June figure and remained at its lowest level since February 2009. The ECB may discuss exiting QE at the upcoming September meeting. However, in the speech at the Jackson Hole Annual Meeting held in late August, ECB President Mario Draghi did not mention monetary policy.

5. Good news: Trump tax change final bad news: debt ceiling or countdown in advance

SMM News: After half a year, Trump's unclear tax reform plan is finally expected to meet with you next month, but the debt ceiling problem may be less than two weeks. On Thursday, US Treasury Secretary Mnuchin said in an interview with CNBC that the Trump administration has prepared a "very detailed" tax reform plan that has been submitted to members of Congress and will be made public before the end of next month. For the tax reform program, he is working with Trump's chief economic adviser Gary Cohn and parliamentarians. In his speech, Mnuchin is full of confidence in the prospects of the tax reform: "The House and Senate are now promoting the program to their respective members. We will publish a blueprint for the plan, which will be sent to the (Congress) Committee. Then we will hand over the bill to the president, and he will sign it." "We expect the Senate and the House of Representatives to pass this year and hand it over to the president. We are excited about the progress we have made." Mnuchin believes that it should be adopted. Economic growth supports tax reform. He said that the neutral position of taxation is being discussed.

6. The highest growth rate since the first quarter of 2015! US second quarter GDP revised to 3%

SMM News: Driven by the increase in household expenses and corporate investment, the US GDP growth rate in the second quarter was revised to the fastest level since the first quarter of 2015. After the better-than-expected data release, the USD/JPY and US Treasury yields expanded, and spot gold expanded. According to data released by the US Department of Commerce on Wednesday, the US real GDP in the second quarter was revised at 3% quarter-on-quarter, the highest growth rate in the first quarter of 2015, better than the 2.7% forecast, and the initial value of 2.6%. The US second-quarter GDP deflator has a revised value of 1%, which is flat and expected. Among them, consumer spending growth rate of 3.3%, better than 3% expectation, is the fastest growth rate since the second quarter of 2016, affected by strong employment market, stable inflation and low lending rate, consumer spending is still the main driving force for current expansion . The increase in consumption growth reflects spending on wireless telephony equipment, used cars, electricity and natural gas

7. US â€œsmall non-agriculturalâ€ in August hit the biggest increase in March

SMM Information: The ADP employment data, which is known as â€œsmall non-agriculturalâ€, has the largest increase since March, with trade industry data ranking first and the largest increase since the end of 2016. In addition, both construction and manufacturing data have grown substantially. On August 30, the United States released August ADP employment data. In August, ADP employment increased by 237,000, which was significantly better than expected. Economists had predicted that ADP employment increased by 188,000 in August. The CPI was 1.5% year-on-year, up from 1.3% in July and higher than the expected 1.4%. The core CPI for the Eurozone in August was 1.2% year-on-year, unchanged from expectations and July. In terms of inflation, energy prices rose by up to 4.0% in August, up from 2.2% in July. Service prices followed closely, rising 1.6%, and food and tobacco and alcohol prices rose 1.4%. In addition, non-energy industrial products have the lowest price increase of 0.5%. Another data released on the same day showed that the unemployment rate in the euro zone in July was 9.1%, which was the same as the June figure and remained at its lowest level since February 2009. The ECB may discuss exiting QE at the upcoming September meeting. However, in the speech at the Jackson Hole Annual Meeting held in late August, ECB President Mario Draghi did not mention monetary policy.

5. Good news: Trump tax change final bad news: debt ceiling or countdown in advance

6. The highest growth rate since the first quarter of 2015! US second quarter GDP revised to 3%

7. US â€œsmall non-agriculturalâ€ in August hit the biggest increase in March

The store industry, education and health services industries followed closely with 51,000 and 45,000 respectively.

8. The number of non-agricultural new employment in the United States in August was 156,000, far less than expected.

Hong Kong's Wind Info Agency reported that the US Department of Labor announced on September 1 that the US non-agricultural increase in August

The number of employed people is 156,000, which is expected to be 180,000. The previous value was revised from 209,000 to 189,000. The non-agricultural employment in June

It was revised down to 21,000, with an initial value of 231,000; the unemployment rate was 4.4%, 4.3% was expected, and the previous value was 4.3%; the labor force participation rate was 62.9% in August, and the previous value was 62.9%. The salary growth rate was also lower than expected. The average hourly wage in August increased by 2.5% year-on-year, expected to increase by 2.6%, the previous value increased by 2.5%; the chain increased by 0.1%, and the expected increase of 0.2%. The previous value was revised from 0.3% to 0.1%. . Specifically, the US private sector employment population increased by 165,000 in August, with an expected 172,000, the previous value was revised from 205,000 to 202,000; the manufacturing employment population increased by 36,000, expected to be 0.8 million, and the previous value was revised from 16,000 to 26,000. . The analysis said that the US employment growth in August was less than expected, but the growth should be enough for the Fed to announce the contraction plan; but the weak salary growth will make the Fed choose to continue to raise interest rates this year to be more cautious. The modest growth in employment in August may reflect seasonal factors and the shortage of skilled workers. In the past few years, August data is often published with weaker values, but the revised value will be revised. Hurricane Harvey, who hit Texas, had no impact on the employment data because the hurricane landing time was later than the statistical survey period. The US Department of Labor said that Hurricane Harvey had no significant impact on August nonfarm payrolls and unemployment data; the collection of household survey data was completed before the hurricane, and the collection of corporate survey data was basically completed before the hurricane, nationwide and subject to The collection rate of the affected areas is in the normal range.

2. Industry news

1. Development and Reform Commission: The growth of ten non-ferrous metals in the country in July was zero year-on-year.

SMM News: The National Development and Reform Commission website released the operation of the non-ferrous metals industry in July on August 31. In July, the output of ten non-ferrous metals in the country increased by zero year-on-year, compared with 0.7% in the same period last year. Among them, copper production increased by 1.5%, growth rate dropped by 8.1 percentage points year-on-year; electrolytic aluminum production decreased by 0.3%, the decline narrowed by 1.2 percentage points; lead production increased by 5.6%, growth rate increased by 1.1 percentage points year on year; zinc production decreased by 6.3% The same period last year was a 0.4% increase. From January to July, the output of ten non-ferrous metals in the country was 32.01 million tons, a year-on-year increase of 6%, and the growth rate increased by 5.5 percentage points year-on-year. Among them, copper output was 5.09 million tons, up 7.2%, down 0.7 percentage points; electrolytic aluminum output was 19.53 million tons, up 7.5%, down 1.9% in the same period last year; lead output was 2.95 million tons, up 6.1%, down 1 percentage point; Zinc production was 3.46 million tons, down 2%, and the decline was 1.3 percentage points year-on-year. Alumina production was 42.95 million tons, up 19%, down 0.6% in the same period last year.

2. Mexico's copper output increased by 8.6% year-on-year in June. Lead production increased by 14.0% year-on-year.

SMM News: Mexico's National Bureau of Statistics released data on Thursday showed that the country's June copper output increased by 8.6% to 44,087 tons; lead production increased by 14.0% year-on-year to 13,698 tons; zinc production year-on-year Increase by 1.4% to 34,545 tons. For precious metals, gold production decreased by 5.6% year-on-year to 10,005 kg; silver production decreased by 0.8% from the same period last year to 350,645 kg.

3. South African power supplier CEC will resume power supply to Monco's Mopani copper mine

SMM News: According to foreign news on August 30, the South African presidential office said on Wednesday that the country's power supplier Copperbelt Energy Corporation (CEC) and Glencore's Mopani copper mine have reached an agreement to resume the Mopani copper mine from Wednesday. All power supply. South African Presidential Spokesperson Amos Chanda said in a statement that the details of the agreement will be finalized within six weeks. CEC purchased electricity from the country's state-owned power companies and then sold it to mining companies. After a new tariff dispute, the company reduced the power supply to the Mopani copper mine to 130 MW to 94 MW.

4.WBMS: Global copper mine production in the first half of 2017 fell by 0.1% year-on-year

According to WBMS data, global copper mine production in the first half of 2017 fell only 0.1% year-on-year to 10.1 million tons, indicating that some mines other than the top ten mines are increasing production. According to the data given by WBMS, in the first half of this year, the production of copper mines in Chile and Peru, the world's two major copper producers, accounted for 25% and 11.6% of the total global production respectively. Among them, Chile's copper output in the first half of the year decreased by 9%. It is also one of the main reasons for the decline in global copper production in the first half of the year. However, in the first half of the year, Peruâ€™s copper production in the worldâ€™s second largest copper producing country increased by 4.7%, while in other countries such as China, Australia and Mexico, copper production in the first half of the year has mostly stabilized and has a certain increase. Copper production in the EU 28 countries increased by 8% in the first half of the year. The increase in copper production in other countries has compensated for some of the decline in supply due to strikes and production cuts. The consumption situation in the first half of the year was not satisfactory: the data given by WBMS showed that global copper consumption in January-June was 11.71 million tons, compared with 11.88 million tons in the same period last year, a year-on-year decrease of 1.4%. Among them, China decreased by 4.57% year-on-year, but still accounted for more than 48% of global demand; the EU 28 countries fell by 3.1% year-on-year.

5. Indonesia hopes that the Freeport Grans copper mine ownership transfer can be completed in one time

SMM News: Indonesian State and Enterprise Minister Rini Soemarno said on Thursday that Indonesia hopes that Freeport McMoRan Inc's ownership of the Grasberg copper mine in Indonesia can be completed in one operation. Located in the province of Papua, Indonesia, the Grasberg copper mine is the second largest copper mine in the world. Rini Soemarn said: "I hope that it can transfer 51% of ownership at a time." "If the Freeport staged ownership, then the situation is somewhat difficult for us." Soemarno added that Indonesia plans to get the remaining 41.64% by the end of 2018. Ownership, which currently holds 9.36% ownership.

6. The output of the world's top ten copper mines in the first half of the year decreased by 11.7% year-on-year.

SMM August 29th: In 2017, more than half of the total, the major mining companies announced the first half of the financial report, compared to the frequent strike disturbance in the first quarter, causing the main copper mine output to fall more than 10%. In the second quarter, after the strike ended, the output of copper mines showed a recovery growth. The top ten major mining companies in SMM statistics narrowed to 8.3% year-on-year. In the first half of this year, the output of the top ten mines and copper mines fell by about 11.7% year-on-year.

7. Indonesia has reached an agreement with Freeport on the new mining license for the world's second largest copper mine

SMM: Indonesia and Freeport-McMoRan Inc. agreed on Tuesday that Freeport will continue to operate its Grasberg copper-gold mine, but it needs to sell 51% of the mine. Ignasius Jonan, Minister of Energy and Mineral Resources of Indonesia, said that Freeport can immediately apply for a postponement of the license period of ten years to 2021. The Grasberg mine is the second largest copper mine in the world. Jonan said at a joint press conference: "The president requires a 51% ownership transfer rate, and Freeport has already agreed to it." Freeport CEO Richard Adkerson also participated in the conference. Jonan said: "There is only time left to be discussed. The price issue will be discussed later."

3. Futures market

This week, the closing price of the Shanghai-March copper March contract was divided. The Shanghai copper three-day closing price fell 100 yuan to 52,950 yuan / ton, a decrease of 0.19%. The price of the three copper prices rose by 142 US dollars to 6,846 US dollars / ton, an increase of 2.12%. The price of the main contract of Hulun Copper reached a new high in the year. In the first half of the week, the data is relatively light, copper prices remain high and volatile, and the August ADP employment data and GDP estimates released by the US on Wednesday night exceeded expectations.

As a result, the dollar bottomed out and suppressed non-ferrous metals. The domestic manufacturing PMI announced on Thursday pushed up the price of copper after the price surged. The copper price followed the ferrous metal news on Friday. Overall, copper prices remained high and volatile this week.

On Friday, the ratio of the Shanghai-Lex in March was 1.17, which was lower than that of last Friday. It shows that the recent trend of the exchange of copper was slightly stronger than that of Shanghai copper.

On Friday, the copper and copper import profit and loss range recorded -589.36/tonne to -476.68 yuan/ton on Friday. The absolute value has shrunk from last Friday and is still below the break-even line. The import window is still closed.

In the spot market, the discounted 130-adhesive 70 yuan/ton range was maintained at the beginning of the week. The ratio of Shanghai-London continued to decline, the supply of imports was reduced, and some of the value-preserving discs were still blocked. The good copper first narrowed the discount. In the week, the discounted water was narrowed every day. The weekend has turned slightly, and the flat copper has followed the trend. The premium has been collected to 30. Yuan / ton. During the week, good copper led the trade under the guidance of traders, and the downstream kept the purchase. (Shanghai Nonferrous Network)

5. Risk warning

Domestic and international macroeconomic indicators exceeded expectations

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