Recently, copper prices have broken through platform support and shown an explosive growth trend. From the perspective of global supply and demand and the trend of domestic policy-driven production reductions, we will analyze whether this abnormal growth is sustainable?

Copper prices show no signs of falling sharply

Well, regarding the price of copper, our factory is producing all-copper lock cores, so we have been paying attention to the price of copper materials. We export to customers in the Middle East with large orders, and fluctuations in copper prices will seriously affect product prices.

In this case, we monitor the changes in non-ferrous metals every day to calculate whether the factory should purchase raw materials.

In the early stage, I will refer to two websites, one is called LME, which is London Metal Exchange, and the other is called SMM, which is Shanghai Nonferrous Metal Network. Generally speaking, prices in London are lower than prices in Shanghai.

But here, it serves as a big reference, because there is a time difference between London and Shanghai. For example, when London is 9 am, it is already 5 pm in Shanghai. In this case, if the copper price on the LME rises today, it will be reflected in the price of nonferrous metals in Shanghai tomorrow, and the price in Shanghai will rise tomorrow.

Therefore, the preliminary research and price observation are all based on the changes in copper prices in the international market to judge the changes in China’s copper prices. There is a high probability that there will be no mistake. If the price of copper in London rises, and based on experience, it will continue to rise, then domestic factories will consider immediately buying or locking in some copper, even if it is a small wave of futures, in order to maintain supply in the future.

The reason is simple

First, the U.S. dollar implements a strong policy, as you can see by looking at the exchange rate of the RMB against the U.S. dollar.

In this case, if the US dollar becomes valuable, gold, copper, silver, and a large number of heavy metals and non-ferrous metals will rise accordingly. Although the U.S. dollar is decoupled from gold, it can be understood that it is also a liquid hard currency.

Second, it is the expectations of investors and consumers.

If you think about it, the U.S. dollar remains strong and appreciates, which means the U.S. dollar is valuable. If the U.S. dollar is valuable, can we buy more gold?

If you can buy more gold with U.S. dollars in the market, those who hold U.S. dollar assets and currencies will choose to take advantage.

An imbalance between supply and demand and a sudden influx of buying will naturally push up the prices of gold and a range of non-ferrous metals.

Third, countries are anxious about economic conditions.

Why have major countries started to accumulate ferrous metals and precious metals since last year? Because of the need for hedging.

Western countries need to maintain the security of monetary policy and need precious metals and non-ferrous metals.

China’s situation is special. Reserves of these are not only a safe haven, but also a huge manufacturing industry that needs to be consumed. Because the world’s mineral reserves are limited.

Fourth, the unstable international situation will push up copper prices.

Why? Because a large number of artillery shells, missiles, bullets, and all aspects of the military industry are inseparable from copper.

The war between Russia and Ukraine, the war between Palestine and Israel, and the Djibouti area on the Red Sea are also covered by war clouds. There are also many regional conflicts. These military supplies will be consumed in large quantities, and the amount of copper will increase significantly.

Fifth, China’s military expenditure has increased. Everyone has seen the detailed figures released to the outside world.

Look at the real numbers

Let me show you another number.

What I said is all based on my own analysis, which cannot be accurate. Let’s just look at the real numbers.

Look, copper ore is chalcopyrite. Look, who in the world is desperately buying and importing chalcopyrite?

We, the Chinese, import almost 60% of the world’s copper.

In 2021, China’s copper imports will be US$55 billion.

That is to say, 60% of the brass dug out around the world is sold to the Chinese.

Then there are Japan, South Korea, Germany, India, Spain, and our country, Taiwan. You see, these are all major manufacturing countries.

So where is our source of supply? Who is mining copper and selling it to us?

This is the export data. Look who is selling copper, it is these countries.

Because the U.S. dollar is strong, it is difficult for copper prices to come down.

China is too big, and our thirst for imports will not be significantly reduced. Just like our demand for oil imports is also extremely huge.