Today, international copper prices rose to 9,000 US dollars per ton, the highest level in 11 months.

Affected by this, the A-share nonferrous metals sector surged. Northern Copper and Pengxin Resources rose and stopped, Yunnan Copper and Jiangxi Copper rose more than 7%, Tongling Nonferrous rose more than 5%, and Zijin Mining rose more than 3%.

In terms of Hong Kong stocks, Zijin Mining and Jiangxi Copper rose more than 2%.

In the ETF market, non-ferrous metal-related ETFs had the highest gains. Among them, non-ferrous 60 ETFs surged 4%.

Supply is tight

On the one hand, the supply and demand situation of copper has led to an increase in asset prices.

According to reports, the China Nonferrous Metals Industry Association held a symposium for copper smelting enterprises this week to discuss the declining processing costs of copper ore and the tight supply of raw materials.

Sources revealed that at the meeting, China's large copper smelters agreed to cut production at some loss-making plants to deal with the shortage of raw materials.

Agencies generally believe that copper will be in a tight state of supply and demand, which will increase its allocation value.

In a report, Macquarie Group said commodities are in the early stages of a cyclical recovery.

Macquarie analysts, led by Marcus Garvey, expect there will be shortages in the concentrate and refined metals markets this year, and smelter production will decline “after another year of disappointing mine supply.”

Macquarie expects copper prices to peak at 9,500 US dollars per ton in the third quarter of this year. They said that due to a shortage of concentrate, global refined copper production may increase by 2.1% this year, which is lower than previously anticipated.

However, they believe that production cuts at Chinese smelters may be limited.

Furthermore, CITIC Securities predicts that in 2024, global refined copper production will be 26.4 million tons, up 2.7% year on year, and that the balance between global refined copper supply and demand will be +130,000 tons in 2024, showing a tight balance trend.

CITIC Securities believes that if production cuts are implemented on the smelting side in the future, the balance between global refined copper supply and demand is expected to shift from a slight excess to a shortage early during the year. Against the backdrop of a tight balance that is difficult to maintain, the copper price center is expected to move upward. The average price of copper is expected to be 9,000/10,000 US dollars/ton in 2024/2025, respectively.

Changes in expectations for the Fed to cut interest rates

Furthermore, there is a trend in the market to rush to cut interest rates. Recently, all non-ferrous metals have experienced a wave of market. It used to be gold, but now it's copper's turn.

Although the latest US inflation data has exceeded expectations, and market expectations of the Fed's interest rate cut have cooled further, it is certain that interest rate cuts will definitely arrive.

Newly, the market expects a cumulative 75 basis point cut in interest rates during the year. The previous forecast was to cut interest rates by 100 basis points.

Generally speaking, as the Federal Reserve and other central banks around the world cut interest rates, there is a high probability that commodities will rise.

CICC pointed out that expectations of interest rate cuts due to the release of US economic data fluctuate from side to side as a major factor affecting copper prices recently. Copper prices mostly fell during high-interest platform periods. The fundamental point that the decision to cut interest rates affects the copper price trend is still the extent of the decline in demand:

1) When the economy does not land or has a soft landing, and small financial risks trigger interest rate cuts, there is a high probability that copper prices will fall or rise slightly;
2) In a situation where interest rate cuts are triggered by a hard economic landing or large-scale financial risk exposure, copper prices are more likely to fall sharply.

CICC believes that the probability of the first macroeconomic situation occurring is higher, but this still depends on the Fed's assessment of risks and grasping when to cut interest rates during this high interest rate platform period.