Copper prices break through six-week high, what's ahead? BHP Billiton's performa

2024-08-17

1. Copper prices surge past six-week high! Analysis suggests long-term demand will support copper prices, but short-term supply-demand imbalance remains

Copper prices continue to climb amid market optimism, with three-month copper futures on the London Metal Exchange (LME) rising to a six-week high, closing at $9,419.5 per ton. Although market expectations of a Federal Reserve rate cut in September have provided support for copper prices, the reality of lagging demand and global supply chain pressures make the future trajectory of copper prices still uncertain. The market generally believes that despite short-term pressures from a slowing global economy, the continuous growth in long-term demand will provide strong support for copper prices. Renowned institutions such as BHP Billiton predict that by the end of 2025, there will be a moderate surplus in global copper supply. However, with the continuous growth in future demand, especially from renewable energy and grid expansion, the global copper market may face a supply shortage later in the century, triggering a "price surge" mechanism.

Jian Jia, Director of Equity Investment at Miyuan Investment: Copper prices are influenced by multiple factors. In the short term, market optimism and policy expectations provide certain support, but the actual situation of demand and supply chains will determine the long-term trend of copper prices. Investors and market participants need to closely monitor global economic data and policy trends to make more accurate market judgments.

Qian Qiming, Executive General Manager of Shenwan Hongyuan Securities Research Institute: It is expected that copper prices will maintain high volatility in the future.

Advertisement

2. U.S. consumer confidence rises to a six-month high, but optimism about job prospects declines

Data released by the Conference Board on Tuesday shows that the U.S. consumer confidence index in August rose to a six-month high, with optimistic views on the economy and inflation offsetting the impact of weakened confidence in the labor market. Dana Peterson, Chief Economist at the Conference Board, stated that although consumers' assessment of the current labor situation remains positive, it is still relatively weak overall, and their assessment of the future labor market is more pessimistic, which may reflect the recent rise in unemployment rates. Consumers are also less optimistic about income prospects. Approximately 32.8% of consumers believe that there are plenty of job opportunities, which is the lowest proportion since March 2021 and a decline for the sixth consecutive time. The proportion of respondents who think it is difficult to find a job has slightly increased. The gap between the two has fallen to a three-year low. Central bank officials and economists are closely monitoring the development of the labor market. Federal Reserve Chairman Powell acknowledged that the downside risks to employment have increased, while inflation risks have decreased. San Francisco Fed President Daly said on Monday that it is appropriate to start cutting interest rates now, while Richmond Fed President Barkin stated that he still sees upward risks to inflation but supports gradually lowering interest rates. Mohamed El-Erian, Chief Economic Advisor at Allianz, said that the effect of interest rate cuts takes time to permeate the entire economy. The market has currently eased many of the burdens on the Federal Reserve, but there are still many unresolved issues.

Jian Jia, Director of Equity Investment at Miyuan Investment: Federal Reserve officials generally support cutting interest rates at the upcoming meeting to address the cooling labor market and the risk of economic slowdown. Although concerns about inflation still exist, officials are more focused on supporting economic growth and stabilizing the labor market. It is expected that the interest rate cut in September will be 25 basis points, but the Federal Reserve will adjust its policy flexibly according to economic data and market conditions.

Qian Qiming, Executive General Manager of Shenwan Hongyuan Securities Research Institute: The Federal Reserve starts interest rate cuts steadily, trying to minimize the impact of significant market fluctuations. The current A-share mid-year report disclosure is coming to an end, focusing on companies with sustained growth in performance, while also paying attention to market style.

3. Volkswagen Group scales back battery factory plans in Europe and America, aiming to start producing solid-state batteries by 2030

Reports indicate that due to the recent downturn in the electric vehicle market, the Volkswagen Group is scaling back its plans for battery factories in Europe and North America. Volkswagen Group Chief Technology Officer Thomas Schmall said in an interview: "The expansion of the group's battery factories in Europe and America will depend on the development of the electric vehicle market. The goal of achieving a battery capacity of 240,000 MWh by 2030 is not set in stone." Thomas Schmall declined to reveal whether the Volkswagen Group will produce lithium iron phosphate (LFP) batteries at the Salzgitter factory. However, he stated that the Volkswagen Group will start producing solid-state batteries before 2030. Solid-state batteries offer electric vehicles longer driving ranges and faster charging speeds. In July of this year, the Volkswagen Group announced an agreement to mass-produce solid-state batteries based on QuantumScape technology.Mi Yuan Investment Equity Investment Director Jian Jia: The adjustments made by Volkswagen Group reflect the current uncertainty in the electric vehicle market and considerations for cost-effectiveness. By scaling back plans for battery factories, Volkswagen is maintaining flexibility while also seeking diversification and innovation in battery technology to adapt to market changes and competitive demands.

Shenwan Hongyuan Securities Research Institute Executive General Manager Qian Qiming: The key to Volkswagen Group's downsizing of battery factories in Europe and America lies in cost and demand. Domestic industry chain companies continue to make new progress in the layout and industrialization of electric vehicle batteries.

BHP Group CEO expects short-term volatility in the global commodities market in the 2024 fiscal year

BHP, the world's largest mining company, announced its full-year results for the 2024 fiscal year ending June 30. The company's revenue for the year was $55.658 billion, a year-on-year increase of 3%; distributable profit grew by 2% to $13.66 billion, but it was below analysts' average expectations. Revenue from copper operations was $18.566 billion, a year-on-year increase of 15.8%; revenue from iron ore operations was $27.952 billion, a year-on-year increase of 12.7%; revenue from coal operations was $7.666 billion, a year-on-year decrease of 30.0%. The company's operating profit was $17.537 billion, a year-on-year decrease of 24%; the annual dividend was $1.46, lower than the previous year's $1.70; net operating cash flow was $20.665 billion, a year-on-year increase of 11%; net debt was $9.120 billion, a year-on-year decrease of 18%. CEO Mike Henry said that the company still has a lot of attractive growth space in copper, and he expects short-term volatility in the global commodities market, predicting that developed economies will gradually get rid of the lingering impact of high interest rates in the next few years. BHP's stock price closed up 0.32% overnight, at $55.69.

Mi Yuan Investment Equity Investment Director Jian Jia: BHP's performance shows that despite the challenges of declining operating profit and reduced dividends, the company has achieved profit growth through robust operations and rising commodity prices. The potential recovery of China's real estate market and the stable growth of other industries provide a positive outlook for BHP, especially in iron ore and copper operations. However, the uncertainty of fluctuations in the global commodities market still needs attention.

Shenwan Hongyuan Securities Research Institute Executive General Manager Qian Qiming: The decrease in downstream demand such as real estate affects the intense competition in upstream raw material prices, compressing the profit space of the upstream.

Walmart's introduction of a series of discount bundle services is effective, with a surge in subscription members

From the latest Burger King discounts to fuel savings, Walmart is launching a variety of bundled activities to attract American customers to join its subscription membership program. The retail giant announced last week that Walmart+ users' membership will add a new benefit: a 25% discount on orders through the Burger King app, and starting from September, Walmart members can get a free flame-grilled Whopper every three months for every purchase of a burger. Walmart has more than 4,600 physical stores in the United States and launched a subscription plan as early as 2020. Users can choose to pay $12.95 per month or an annual fee of $98 to receive many additional allowances, discounts, and benefits. First, members can get discounts and offers in advance. Second, free shipping and easy returns. Third, Walmart members can access the streaming platform Paramount+ for free, without additional fees. In addition, Walmart members can also get fuel savings. The growth of Walmart's membership is seen as one of the drivers of revenue growth in this quarter. Walmart currently raises the increase in net sales this year to 4.75%, and also raises the targets for operating income and profit. Walmart's stock price closed up 0.13% overnight, at $76.13.

Mi Yuan Investment Equity Investment Director Jian Jia: Walmart has successfully attracted a large number of new members, especially young consumers, by providing a variety of membership benefits and discount measures, which not only enhances customer loyalty but also brings revenue growth to the company. With the in-depth promotion and optimization of the membership program, it is expected that Walmart will continue to maintain a positive market performance.

Shenwan Hongyuan Securities Research Institute Executive General Manager Qian Qiming: High-quality and cost-effective combination services are an important means for Walmart to attract customers. The development of the retail industry in A-shares can be followed.

Comments