Since the beginning of this year, affected by a combination of factors, some commodity prices continued to rise, copper prices once hit a record high. In accordance with the China State Council Executive Meeting's plan for ensuring a stable supply and price of commodities, the State Food and Materials Reserve Bureau released the Non-ferrous metal in two batches in July, adding up to about 270,000 tons of copper, aluminum and zinc, at present, a total of 50,000 tons of copper are put into the market, and the cooling effect is remarkable. There are several reasons for the rapid rise in the price of copper. One is the inflation trade. Since the outbreak of new crown pneumonia, the central banks of major economies have implemented ultra-loose monetary policy, and the global liquidity environment has remained extremely loose. In the post-epidemic era, the progress of demand recovery in the global economy is faster than that of supply, especially the rapid recovery of consumption in countries represented by China. The governments of major economies have launched large-scale stimulus programmes, and the market generally expects that aggregate demand will be strong. Fourth, speculative trading, with overseas investment institutions advocating a super-cycle for commodities against the background of "double carbon" , london Metal Exchange (LME) Copper Investment Fund Holdings and Comex Copper non-commercial Holdings reached all-time highs at the end of last year and this year. China's copper consumption ranks first in the world, accounting for nearly 50% of the total global copper consumption. Judging from the distribution of the global copper industrial chain, domestic enterprises are more concentrated in the middle and lower reaches of copper smelting, processing and assembly, the short-term price surge has a negative impact on these enterprises, especially the small and medium-sized enterprises with weak anti-risk ability, such as high cost, sudden increase of capital pressure and sharp contraction of profits. At such a point, the national reserve is put into the appropriate time, achieved the desired effect. First, the accurate delivery in the spot end played a "ballast stone" role. The target of this reserve investment is the Non-ferrous metal, with the highest efficiency, the lowest cost directly to help the prices of raw materials have been plagued by production enterprises. With the support of national reserves, the majority of enterprises have the bottom of cost control, more confidence to improve production. Second, the management of expectations in the trading end played a speculative "crowding out effect. ". The state reserve investment is intended to convey to participants in Global Commodity Trading China's firm position of confidence in curbing the unreasonable rise in commodity prices, first affecting the adjustment forecasts of many foreign participants, this is a direct reflection of the LME and COMEX trading positions to fall back; second, to stabilize domestic participants'expectations, to prevent panic buying. The rational return of market participants'expectation is an important basis for price to deviate from speculation and return to supply and demand fundamentals. After two state-owned copper deposits, the previously overheated price of copper has cooled significantly recently, and for domestic companies it is now down nearly $1,000 a tonne compared with the purchase price at its peak in June. On the current mainstream view, the Fed represented by the major economies to gradually withdraw from easing is the general trend, inflation trading and other non-industrial factors will be dispersed. Meanwhile, as the global epidemic is brought under control, the mismatch between supply and demand will gradually return to normal. The data showed that domestic copper consumption in the first half of the year also declined compared to the same period last year, and demand expectations were disappointed. With the continued investment of state reserves in the latter half of the year, the price of copper, represented by the Non-ferrous metal, was expected to return to a reasonable level. In the long run, the state can encourage and support a group of domestic enterprises to "jointly go to sea" and March upstream to obtain copper resources from the source, to enable Chinese enterprises in the global copper industrial chain to realize a certain degree of "self-hedging" of price fluctuation risks in each link of the industrial chain in the upper, middle and lower reaches, to ensure the security and stability of the supply chain of the industrial chain, and to promote the smooth operation of the national economy, to contribute to the long-term economic development of our country. 

Source: Economy Daily Cut

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