Wang Siran, Deputy Director of the Jinrui Futures Research Institute, commented on the non-ferrous metals market in 2018, noting that among major global economies, economic growth in Europe and the U.S. is driven by investment and foreign trade. Meanwhile, China’s real estate investment has a significant marginal impact on global economic growth; therefore, a slowdown in China’s real estate investment will lead to a slight weakening of the global economy.

“Copper prices typically lead copper-mining capital expenditures by one to two years, while capital expenditures lag behind changes in copper-mining capacity by five to eight years. Since the end of 2016, a key logic has been that copper-mining capacity will hit a bottleneck in about five years, yet demand will continue to grow. As a result, prices must rise to incentivize the commissioning of new copper mines, providing bottom support for copper prices. The subsequent sustained price rally was driven by continually improving macroeconomic expectations and the introduction of policies facilitating the import of scrap copper.” Regarding the patterns in copper price movements, Wang Siran noted, “Copper prices exhibit fluctuation cycles lasting six to ten years. Bull markets tend to be relatively short-lived, whereas bear markets last longer—typically five to seven years for bear markets and one to three years for bull markets. The reason is that after prices rise, substantial additional copper-mining capacity can be brought online in the future. However, once such capacity comes into operation, supply becomes highly rigid, requiring a prolonged period to work off the excess capacity.”

“In 2018, copper prices are expected to fluctuate at high levels. On the LME, the core price range for March contracts throughout the year will be between US$6,000 and US$7,500 per tonne; on the Shanghai Futures Exchange, the core price range for the main copper contract will be between RMB 48,000 and RMB 60,000 per tonne.” Wang Siran suggested that when trading in a single direction, it’s crucial to grasp the right timing. The market has strong expectations regarding both overseas economic conditions and tightening policies on scrap copper imports. If subsequent overseas economic data gradually weaken, or if the issuance of scrap copper import permits—or actual import volumes—exceed expectations, there will be opportunities to sell high and short. In terms of arbitrage, given the restrictions on scrap copper imports, the domestic refined copper supply situation will become even tighter, especially during peak consumption periods when domestic inventories are being depleted, presenting excellent reverse-arbitrage opportunities.

New-energy vehicles have consistently been a focal point in the market when analyzing factors influencing copper demand. On this issue, Tang Yufeng, a researcher at Jinrui Futures, noted that, judging from recent trends, while policy factors such as the Belt and Road Initiative and new-energy vehicles are likely to provide long-term support for copper consumption, in the short term—given that the base figure is still relatively small—they will hardly drive a substantial increase in overall copper consumption this year. Meanwhile, the power grid sector, which has received less attention from the market, still holds considerable untapped potential.

Li Li, a researcher at Jinrui Futures, analyzed the impact of scrap copper on the refined copper market. She believes that, centering on the hot topic of scrap copper, three key issues warrant focused study: First, how much inventory exists in the scrap copper market; second, how to assess the magnitude of the reduction in scrap copper imports; and third, what impact scrap copper has on the balance and price of refined copper. Influenced by environmental protection policies, the reduction in scrap copper imports has led to an increased reliance on refined copper consumption. Under the current pricing structure, this has created a shortage in the refined copper market, thus necessitating higher prices to incentivize the release of scrap copper inventories and close the market gap.