Summary: Overseas supply disruptions occur frequently, with tight supplies of copper concentrate and scrap copper persisting. Although demand has shown marginal improvements, it remains at a low level. In the first eight months, China's apparent demand for copper declined significantly. Against the backdrop of downward pressure on the global economy, copper prices were generally weak this week.

 1.This week's trend of domestic spot copper prices.

    Frequent disruptions on the overseas supply side have emerged. The Las Bambas copper mine in Peru, operated by MMG, has faced transportation obstacles due to protests, impacting production and disrupting logistics, leading to a downward revision of this year's output forecast. Chile is considering the closure of the Ventanas copper smelter, and the only large-scale copper mine in Ecuador has restricted mining activities due to protests over fuel subsidies. The CSPT group has finalized the fourth-quarter TC (Treatment Charge) floor price, which is about 20% higher than the previous quarter, indicating a short-term trend of TC recovery and increase. However, the supply of copper concentrate and scrap copper remains tight.

Data from the World Bureau of Metal Statistics shows that in the first eight months of this year, mine copper production increased slightly by 0.5% year-on-year, while refined copper production decreased by 2% year-on-year. Copper consumption also declined from 1,579 tons in the same period last year to 1,547 tons, with China's demand falling by 3.3% year-on-year. On the demand side, the year-on-year decline in automobile production and sales data narrowed in September, with a notable month-on-month rebound. The automotive market still faces pressures overall. The operating rate of copper processing enterprises increased month-on-month in September, indicating marginal improvements in downstream demand. The global economic situation is not optimistic, and substantial improvements in demand are unlikely in the short term, with demand remaining at a low level. Copper prices showed overall weakness this week.

For the week ending October 18th, domestic spot copper prices exhibited weakness. The average price of No.1 copper on the Changjiang Nonferrous Metals Network was reported at 46,906 yuan/ton, with a daily decrease of 70 yuan/ton and a weekly decline of 0.74%. The average price for the previous week was 46,930 yuan/ton, down 24 yuan/ton or 0.05% compared to the week before.

 2.The weekly trend of copper futures prices.

    Recently, economic data released by major global economies have generally been unfavorable. China's import and export data decline has confirmed the slowdown in global trade activities and the lack of significant improvement in domestic demand. The decline in U.S. retail sales has exacerbated concerns about an economic recession, while the eurozone's CPI falling short of expectations has sparked new worries about the economic situation. The global manufacturing sector has already fallen into contraction, and the IMF has once again lowered its forecast for global economic growth this year to 3%, hitting a new low since the financial crisis. Although the outlook for Sino-U.S. trade is relatively optimistic, and positive progress in Brexit has boosted market risk sentiment, downward economic pressures make it difficult for copper prices to rebound.

CCMN data shows that LME copper has been trading weakly this week. In the first four trading days, the average price of LME copper futures was 5,766.75perton,withadailydecreaseof13.5 per ton. The average price last week was $5,732.8 per ton, up 0.59% week-on-week.

     Data from the China Nonferrous Metals Industry Network showed that copper in Shanghai was weak this week. The weekly average settlement price of the current month contract 1911 was 46,798 yuan/ton, with a daily average decrease of 106 yuan/ton; the previous week's average price was reported at 46,762.5 yuan/ton, an increase of 0.08% week-on-week. Copper inventories in Shanghai continued to rise this week, increasing by 17,990 tons to 152,499 tons, up 13.37%, and have cumulatively risen by 29.84% over the past three weeks.

3.Weekly inventory situation of LME copper

As shown in the figure, the overall inventory of LME copper decreased this week, with a cumulative reduction of 13,925 metric tons to 268,400 metric tons, a cumulative decrease of 4.93%.

4. Domestic and International Financial Highlights

Domestic:

China's Producer Price Index (PPI) for September fell 1.2% year-on-year, in line with expectations of -1.2%, and down from -0.8% in the previous month. According to the National Bureau of Statistics, in September 2019, the ex-factory prices of industrial producers fell 1.2% year-on-year but rose 0.1% month-on-month. The purchase prices of industrial producers fell 1.7% year-on-year and rose 0.2% month-on-month. On average for the first nine months, the ex-factory prices of industrial producers remained unchanged from the same period last year, while the purchase prices of industrial producers fell 0.3%.

According to data from the National Bureau of Statistics, preliminary calculations show that the gross domestic product (GDP) for the first three quarters was RMB 69.7798 trillion, up 6.2% year-on-year at comparable prices. By quarter, the growth rates were 6.4% in the first quarter, 6.2% in the second quarter, and 6.0% in the third quarter. By industry, the value added of the primary industry was RMB 4.3005 trillion, up 2.9%; the value added of the secondary industry was RMB 27.7869 trillion, up 5.6%; and the value added of the tertiary industry was RMB 37.6925 trillion, up 7.0%. The overall operation of the national economy was stable, and the economic structure continued to be optimized.

International:

Data released by the U.S. Commerce Department on Wednesday showed that retail sales unexpectedly fell 0.3% in September, the first decline in seven months, dragged down by factors such as lower spending on cars and online shopping. With the U.S. manufacturing sector already in contraction and signs of economic slowdown mounting, the unexpected drop in consumption data further fueled market concerns about an economic recession.

Affected by low oil prices, the harmonized Consumer Price Index (CPI) in the Eurozone rose 0.8% year-on-year in September, lower than the previously estimated near three-year low of 0.9% and below the previous value of 1%. Analysts believe that this may trigger new concerns about the economic situation in the Eurozone and reignite the debate within the European Central Bank about achieving the inflation target of 2% in the medium term.

5. Copper Market Weekly Highlights

Since September 22nd, access to the road leading to MMG's Las Bambas copper mine in Peru has been blocked. On October 15th, the Peruvian government declared a state of emergency for a portion of the road, and authorities have begun road clearing work. Assuming full traffic restoration in the coming days, copper production for 2019 is expected to be slightly below the guided range of 385,000 to 405,000 tons.

Codelco, the Chilean copper company, had announced a plan to sell "green cathode copper" at a premium price to consumers, using more sustainable practices such as renewable energy and recycled water to reduce its carbon emissions. Recently, insiders and a senior executive of the company said that the project has been shelved because the mining company realized that once the copper is melted and put on the market, it will be difficult to guarantee the "sustainability" of its copper.

6. Outlook for Copper Prices

There is still uncertainty about whether the new Brexit deal will pass the highly divided UK Parliament. If it is approved by Parliament, the pound will rise, putting some pressure on the dollar, but the economy will also be hurt. In addition, the market is hoping for a trade agreement between China and the United States, and both sides are working hard to reach a phased agreement as soon as possible. Currently, in the face of global economic downward pressure, interest rate cuts have become the main policy option for countries. The latest data from the United States shows that its economy is under increasing pressure, and although several Fed officials are skeptical about further rate cuts, the expectation for rate cuts is still as high as 83%.

Experts say that China's third-quarter financial data was better than expected, and the domestic economy is operating smoothly overall, with little likelihood of interest rate cuts within the year. According to the National Bureau of Statistics, China's economic growth further slowed in the third quarter, but it is still high growth globally; despite economic downward pressure, the main macroeconomic indicators remain within a reasonable range. Fundamentally, although short-term treatment charges (TCs) show an upward trend, they are still at low levels, and the tight supply situation of copper concentrates and scrap copper has not changed; downstream demand has shown marginal improvement, and the market has some expectations for fourth-quarter power grid investment, with demand expected to further increase; after the holiday, copper inventories on the Shanghai Futures Exchange have continued to rise, which may exert some pressure on copper prices. It is expected that copper prices will fluctuate next week.