Domestic demand is expected to improve, and the upward trend of Shanghai copper is still expected

This year's macro picture is similar
to that of 2007-2008.
From 2007 to 2008, the Fed cut interest rates 10 times, lowered its benchmark interest rate to around zero at the end of 2008, and then carried out three rounds of quantitative easing, resulting in lower real interest rates
.
It was not until late 2015 that the Fed resumed its rate hike cycle
again.
From the time the Fed cut all interest rates to the time copper prices peaked in 2011, copper prices almost doubled
.
In March this year, in response to the impact of the new crown pneumonia epidemic, the Federal Reserve cut interest rates twice in succession, lowered its benchmark interest rate to near zero, and adopted quantitative easing on an unprecedented scale
.
Compared with the QE strength in 2007-2008, copper prices still have a large upside
.

After the subprime mortgage crisis in 2008, the Fed gradually recovered
the economy through three rounds of QE stimulus.
From the Fed's initial QE to its gradual withdrawal from QE, indicators reflecting economic conditions and inflation levels, such as PMI or CPI, have remained in a relatively healthy range for at least 3-4 years
.
At present, it has only been 2 months since the PMI rose above 50, while the CPI is still in a low position, and the epidemic in the United States has not been effectively controlled, and the possibility of the Fed precipitously exiting the super QE is low
.
And this benefits the entire colored plate
, including copper.

In July, domestic vehicle production and sales were 2.
201 million units and 2.
112 million units, down 5.
3% and 8.
2% m/m and up 21.
9% and 16.
4%
y/y.
From January to July, vehicle production and sales were 12.
314 million units and 12.
365 million units, down 11.
8% y/y and 12.
7% y/y, down 5% y/y and 4.
2%
from January to June.
The situation in the home appliance industry is broadly similar
.
On the whole, affected by the epidemic, although the annual automobile production has fallen to a certain extent year-on-year, the impact of the epidemic has basically disappeared, and the "golden nine silver ten" is coming, and the market may have bright spots
.
In addition, in terms of wire and cable with the largest proportion of copper demand, the previous State Grid investment plan in 2020 was 408 billion yuan, but as of the first half of the year, only 165.
7 billion yuan was actually completed, less than one-third of the annual target, and the investment in the second half of the year is expected to accelerate.

Therefore, domestic consumption in the second half of the year is still expected
.

In terms of imports, the profit window for domestic copper imports is currently closed
.
From this point of view, even if the current supply in Chile is normal, the possibility of a large influx of imports is limited
.
The core reason why domestic prices continue to be weaker than external prices may be that the strength of domestic monetary easing and expectations are not as good as overseas
.

In conclusion, macro factors dominate the price more clearly
for copper.
At present, the procurement efforts of downstream enterprises are not large, and the stalemate in copper spot trading is serious, which to a certain extent may inhibit the short-term sharp strengthening
of copper prices.
In the context of overseas supply side being affected by the epidemic rebound, and domestic demand is expected to improve, the upward trend of Shanghai copper is still expected
in the medium and long term.