Global copper enterprises in May collectively scraped production and winds suspected of digesting financing copper

After the financing of copper letters of credit ceased and the regulation of foreign exchange funds was strengthened, since May, Jiangxi Copper, Jinchuan Group, Minmetals Nonferrous Metals and other domestic copper leading enterprises have started to stop production and reduce production winds. Interpretation said that copper supply reduced support for copper prices. Others believe that copper production cuts are to "digest" financing copper and protect the price, the accumulation of financing copper will eventually burst.

Bank control financing copper risk

A financing copper merchant who did not want to be named has been a bit annoyed recently. CCB, which has business relations with him, has informed him that he will no longer do financing copper letters of credit in May. He wants to transfer to other state-owned banks and the result is rejected by the same reason. Finally, he heard that Industrial Bank is still doing a small amount, but the control is very strict. After weighing again, he changed the financing copper business to Industrial Bank.

A person in the futures industry told the Shanghai Securities Journal that since the end of March, the banks have been arranging the risk of financing copper. The relevant documents were issued in April. "The four major banks (BOC, ABC, ICBC, CCB) must not do it. Only Xingye and Standard Chartered Bank have this business."

Financing copper is a process in which a company can open a deferred payment letter of credit after paying a deposit to the bank, and then purchase copper in an overseas market, either immediately selling it or obtaining cash from the bank, in short before the letter of credit expires. Can get a huge low-interest loan. Under the tight credit funds, the copper industry is willing to use financing copper: On the one hand, the cost of letter of credit financing is lower than the domestic general credit cost of about 5%, and the same batch of financing copper can be repeated Pledge loan.

Data show that in 2012, financing copper once exceeded 1 million tons, accounting for 15% of annual demand.

Calling the Financing Copper Letter of Credit shows the risk control awareness of financial institutions. In 2012, the 160 million financing risks of steel traders broke out, and the banks concentrated on prosecution to the court, but it was difficult to guarantee the liquidation rate afterwards.

The second sword of the financial institution's prevention and control financing copper "sacrifice" is to strengthen foreign exchange control. On May 6, the State Administration of Foreign Exchange issued the "Notice on Strengthening the Management of Foreign Exchange Fund Inflows", the "Notice" proposed, The SAFE shall promptly send a risk warning letter to enterprises with serious mismatches in capital flow and cargo flow or large inflows; if the enterprise fails to provide timely explanation or provide proof and makes a reasonable explanation, the SAFE shall strictly supervise it.

An Xin futures copper analyst Yan Ling said that those who are engaged in financing copper earned two links: one is the interest rate difference, one is the exchange rate difference, and now both the interest rate difference and the exchange rate difference are blocked, and the copper is earned by financing. The space has shrunk greatly.

Data show that from January to April, China's cumulative imports of refined copper was 859,900 tons, a year-on-year decrease of 35.34%. Among them, China imported 183,000 tons of refined copper in April, down from 218,800 tons in March, down 32.95% year-on-year. Wang Yu, an institutional analyst in 22 months, said that China’s imports of refined copper fell sharply in April, mainly due to tight domestic importers’ funds. The reason behind this is that banks are tightening financing copper business and the country’s hot money. Inflows and pressure.

Yan Ling believes that a large number of financing copper that did not enter the real economy has contributed to the high copper price; as the financing function gradually subsided, the price of copper metal gradually returned to its nature, and the high copper price will gradually cool down.

Chinese and foreign copper companies have cut production and stopped production

In May, Chinese and foreign copper companies smashed production and caused many copper analysts to doubt the bearish copper price.

China's third-largest copper producer Jinchuan Group executives said on May 24 that the company has closed its annual production capacity of 200,000 tons of smelting facilities. This move may reduce the company's refined copper output by more than 16% this year.

Earlier last week, Yunnan Copper, the fourth largest copper producer in China, announced a cut in production. Jiangxi Copper, the largest copper producer in China, and its holdings of Northern Copper and Penghui Copper also cut production, including Penghui Copper in April. Production decreased by about 20% year-on-year. Minmetals Resources Freeport Indonesia copper project also announced the suspension of production.

Fan Yanxia, ​​a business community, believes that the reason for the suspension or reduction of production of leading copper companies is the shortage of scrap copper raw materials. Copper processing from scrap copper sources accounts for about 34% in China.

China is the world's largest copper producer, and China's copper smelting accounts for more than 60% of the world.

In addition, Rio Tinto's Bingham Canyon copper mine has reduced production by about 100,000 tons due to earth-rock flow. The world's second-largest copper mine, Grasberg, Indonesia, was closed this month due to the death of the tunnel.

The Chinese and foreign copper smelting collectives reduced production and supported the spot market copper price. On May 29, Shanghai Nonferrous Metals 1# electrolytic copper average price was 53675 yuan / ton, while the previous Shanghai copper main contract 1309 closing price was 52290 yuan / ton, spot The premium reached 375 yuan. In addition, copper stocks are falling.

Analysts adjust market excess estimates

Wu Yuneng, deputy general manager of Jiangxi Copper Industry, said at the previous issue of the Derivatives Forum that the production of peers is declining and the domestic copper supply is tight. This can be seen from the spot price of copper.

A series of copper mine closures and supply stagnation have caused some analysts to adjust their estimates of excess market. Robin Bhar, an analyst at Société Générale in London, said that at the beginning of the year we expected a surplus of 300,000 tons, which may now be reduced by about half. I don’t think there will be a shortage again, but there will be a more balanced market."

However, Yan Ling said that the domestic copper producers collectively cut production in order to "digest" the risk of financing copper and protect the price. "A large amount of financing copper needs to be digested by the real economy, and producers involved in this business need a stable market, and this is The deep logic behind the reduction of production. "Yu Ling believes that the demand for copper is light, which is fatal to the impact of copper prices.

Baixian Group executive Ma Xian said at the previous issue of the Derivatives Forum that copper processing fees rose from 10% to 75%, indicating that the supply of copper mines is loose, and the global copper mine investment capacity will be released from 2013 to 2015. The dollar has bottomed out, and the dollar price trend is negatively correlated with metal prices. Therefore, the defensive strategy should be adopted for copper prices. As for the copper price spot premium, this is only a short-term support for copper prices.

In the previous issue of the Derivatives Forum, Minmetals colored executives also said that copper production costs are rising, copper prices should maintain a considerable position. However, the copper application market should be replaced by iron, aluminum, etc., should also pay attention.

It is understood that some futures customers have already vacated this round of copper prices and cleared their positions.

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