Since mid-March, after the market gradually digested the influence of geopolitics and the earthquake in Japan, domestic and foreign copper prices have all started a stabilization and recovery. Under the guidance of factors such as liquidity and loose inner tightness, the external disk copper price rebounded significantly stronger than domestic ones. However, judging from the trend in recent days, due to the bearish influence of the news and the suppression of important pressure levels, the rebounding momentum of copper prices has shown signs of failure and the market outlook will return to a weak situation.

Peripheral turmoil enhances risk aversion in the market Since March, the international situation has become more turbulent than before, and it can be described as an unreliable one. The haze of Japan’s nuclear crisis has not yet been dispersed, and the smoke of Libya has risen again. As the multinational force's military intervention in Libya began, the situation in Libya became more confusing. The continuous escalation of fighting has triggered global market worries about crude oil supply. The cautious sentiment has spread in the wake of the Libyan crisis in a series of countries such as North Africa and the Middle East. It is expected that the geopolitical risks in the above areas will still affect the trend of oil prices for a long time and impact the global financial market.

Recently, Portugal was successively downgraded by Standard & Poor's and Moody's, and Ireland's ** difficulties, coupled with the earlier 30 Spanish banks were downgraded by Moody's rating, which makes the European debt crisis back to the market perspective. Although the possibility of a large-scale crisis in the euro zone this year is small, the impact of the European debt issue on investor confidence in commodity markets is obvious.

At the same time, under the background of the sustained recovery of the U.S. economy, the United States has basically eliminated the possibility of implementing the third round of quantitative easing policies. The recently released US GDP data and employment data are still positive. In recent days, some Fed officials have expressed their opinions in succession and expressed optimism about the US economy and concerns about future inflation expectations. This has led the market to anticipate that the United States may end its previous quantitative easing policy and even begin to tighten its monetary policy. It also induced a short-term higher US dollar index. With the U.S. economy improving, U.S. stocks strong, and interest rate hikes expected, the rate of return of hot money to the United States may accelerate, and the U.S. dollar index has further upward momentum. This may put pressure on the price of non-ferrous metals, including copper, and become the trigger for the fall in the price of metal in the market.

Domestic policy tightening pressures have not been reduced to recovering liquidity and controlling inflation. The Chinese central bank frequently used policy tightening tools to regulate and control in the first quarter. The year-to-date has raised the deposit reserve ratio three times and has raised interest rates once. At present, the domestic large financial institutions have a record-setting deposit reserve ratio of 20%. Because there is a time lag in the transmission of monetary policy, the effect of the superposition of previous policies will be clearly reflected in the subsequent economic data. With the current inflationary pressure still relatively large, it is expected that the central bank’s austerity measures will still have room for implementation in the first half of the year. In particular, with the forthcoming economic data for the first quarter of April, the market expects the CPI to reach a high level of 5% in March. Therefore, it is still highly probable that the policy instruments will be used again in April. Under the current background of the tightening pressure of domestic policies, the short-term market sentiment will be significantly suppressed. At this point in time, the price of copper does not have a clear basis for rising.

China's Copper Consumption Concerns After the Spring Festival, the domestic copper market ushered in the traditional demand season, but the “worse season” situation has caused the market to loosen confidence in copper prices. The sharp decline in domestic copper imports in February may be related to the Chinese New Year holidays. On the other hand, it may indicate that domestic copper consumption is not as strong as it seems. The high inventory in China and surrounding countries also largely explains that the short-term supply of the copper market is still sufficient. At present, the inventory of the previous period exceeded 170,000 tons, and LME stocks reached more than 440,000 tons. It is reported that copper stocks in Shanghai bonded warehouses are close to 700,000 tons. Such a large amount of inventory means that in the situation of tight funding, implicit stocks have largely turned into explicit inventory, and at the same time, the cost of inventory of copper downstream processing companies and end-users has soared under the premise of high copper prices. The procurement strategy has also changed significantly.

In view of the fact that the domestic copper market is still in the process of destocking, whether or not later consumption can “power” becomes an important factor in determining the performance of copper prices. As a leading indicator, domestic PMI data has a direct effect on macroeconomic growth and even copper consumption. Judging from the continuous decline in PMI in recent months, the slowdown in the domestic macroeconomic growth in the second quarter should be a high probability event (PMI index leading 2-3 months), so domestic copper consumption may be facing at the beginning of the second quarter Concerns, this investor should have a certain ideological preparation.

Overall, we hold relatively pessimistic views on the future trend of copper prices and believe that copper prices may experience a greater degree of correction in the second quarter. From the perspective of the short-term trend of LME copper prices, the current round of rebound starting in mid-March has basically ended with the pressure line connecting the high point of February 15 and the high point of March 4 and the copper price of the market outlook is expected to fluctuate. Way down for support. LME copper strong support is located at 9000 US dollars / t line, while Shanghai copper strong support is located at 69,000 yuan / t area.