Huafu Securities: Waiting for the macroeconomic situation to become clear, inflation expectations rebound may once again drive copper prices higher

According to the Wisdom Financial APP, Huafu Securities released a research report stating that currently, the spot TC of copper concentrate has rebounded but remains low, with the contradiction between limited new mining capacity and expansion of smelting capacity continuing to play out. End customers are cautious in their purchasing sentiment, remaining on the sidelines, procuring raw materials as needed, with little change in order performance, overall leaning weak. On a macro level, the bold 50BP rate cut by the Federal Reserve provides strong support for copper prices due to the tight balance of supply and demand; in the medium to long term, as the Federal Reserve deepens rate cuts to boost investment and consumption, while also opening up domestic monetary policy space, coupled with the inflation rebound brought about by the resolution of uncertainties in the U.S. election and the loose monetary and fiscal policies, will support the upward movement of copper prices. Strong demand for new energy will drive the widening supply-demand gap, continuing to be optimistic about copper prices.

Key points from Huafu Securities:

Raw materials end: Copper ore and scrap copper imports decreased month-on-month.

1. Copper ore imports and exports: In September, copper ore imports amounted to 2.436 million tons (Chile 0.772 + Peru 0.481), down by 13.8 thousand tons / -5.4% month-on-month; from January to September, copper ore imports totaled 21.071 million tons (Chile 6.818 + Peru 5.252), up by 768.8 thousand tons / 3.8% year-on-year. 2) Scrap copper: 1) Imports and exports: In September, China's scrap copper imports amounted to 160 thousand tons, down by 10 thousand tons / -5.8% year-on-year, and down by 9 thousand tons / -5.4% month-on-month. From January to September 2024, scrap copper imports totaled 1.674 million tons, up by 226 thousand tons / 15.6% year-on-year; 2) Profit: The average monthly value of refined scrap price difference this month was 1,998.5 yuan/ton, down by 15.56 yuan/ton compared to the previous month (a decrease of 0.8%), and up by 1,184.44 yuan/ton year-on-year (an increase of 145.5%).

Supply end: Cathode copper production increased in September, while imports declined.

1. Production: In September, production was 1.004 million tons, up by 0.6% year-on-year, up by 0.2% month-on-month, with a capacity utilization rate of 81.61%. From January to September 2024, cumulative electrolytic copper production totaled 8.865 million tons, up by 323 thousand tons / 3.8% year-on-year. 2) Imports and exports: In September, the import quantity of cathode copper was 323 thousand tons (Congo 1.19 + Russia 0.35), up by 73 thousand tons / 29.2% year-on-year, down by 6 thousand tons / 1.7% month-on-month; from January to September 2024, the cumulative import quantity of cathode copper was 2.648 million tons, up by 161 thousand tons / 6.5% year-on-year; 3) Profit: The average spot copper refining processing fee this month was 5.43 USD/ton, down by 86.7 USD/ton or -94.1% year-on-year, down by 1.3 USD/ton or -19.3% month-on-month; the price of sulfuric acid in September was 381.07 yuan/ton, down by 11.2 yuan/ton month-on-month.

Processing end: Copper material production increased month-on-month, while exports decreased.

1. Production: In September, it was 2.0126 million tons, down by 2.6% year-on-year, up by 4.5% month-on-month; 2) Imports and exports: In September, the export quantity of copper materials was 77.6 thousand tons, up by 165 tons / 39.1% year-on-year, down by 27 thousand tons / 26.0% month-on-month. From January to September, China's cumulative copper material exports totaled 1.032 million tons, up by 38.3% year-on-year Terminal Demand: In September, the apparent demand was 1.311 million tons, up by 7.3% month-on-month.

Terminal Demand: In September, air conditioner production was 18.84 million units, up by 16.9% year-on-year; refrigerator production was 9.63 million units, up by 8.8% year-on-year. From January to September of year 24, the cumulative year-on-year comparison of housing construction area was -22.3%, and the completed area was -24.4%. In September of year 24, the production of new energy vehicles was 1.31 million units, up by 48.7% year-on-year; the cumulative production of photovoltaics from January to September of year 24 was 425.16 million kilowatt-hours, up by 12.1% year-on-year.

Macroeconomic Analysis: In the United States, the non-seasonally adjusted CPI in September recorded a year-on-year rate of 2.4%, lower than the previous month's 3.3%, in line with market expectations; the core CPI monthly rate in September slightly rose to 3.3%.

Overall, the core CPI monthly rate in the United States continued to cool down, showing a downward trend in inflation. The Federal Reserve boldly initiated a 50 basis point rate cut in September, starting a global monetary easing cycle. Considering the possibility of expansive fiscal policy post the U.S. election, expansive monetary policy combined with expansive fiscal policy may lead to a rebound in inflation expectations, supporting copper prices to strengthen again.

Investment Advice:

Individual Stocks: Focus on leading companies such as Zijin Mining (02899, 601899.SH), and pay attention to Cangzhou (000408.SZ). Other stocks to watch include Luoyang Molybdenum (03993, 603993.SH), Jinchengxin (603979.SH), Tongling Nonferrous (000630.SZ), Tibet Mining (000762.SZ), North Copper, and Jiang Copper; in the Hong Kong stock market, focus on Minmetals Resources (01208) and China Minmetals Corporation, among others.

Risk Warning: Downstream demand falling short of expectations, U.S. economy experiencing a hard landing