Double festival long holiday increases short-term supply and demand contradiction Shanghai copper may continue to rise in the short term

On the macro front, Trump announced that from September 24, he will impose 10% tariffs on $200 billion of Chinese exports to the United States; Effective January 1, 2019, the tariff will be raised to 25%.

The United States also threatened that if China retaliated against agricultural products and other industries, the United States would immediately implement more aggressive tariff measures, imposing tariffs
on about $267 billion of additional imports.
In response, China decided to impose tariffs of 10% or 5% on 5,207 tariff lines originating in the United States, or about US$60 billion, effective September 24
, 2018.
Sino-US trade frictions continue to escalate, the market reaction is calmer, the market has been fully expected, after the tariff boots landed investor worries have eased, but in the medium term, the deepening of the trade war is bound to hinder the pace of global economic recovery, adversely
affecting the long allocation of commodity copper.

In terms of inventory, as of September 14, copper inventories on the world's three major exchanges have declined
to varying degrees.
Among them, LME copper stocks fell for three consecutive weeks to 225,900 tons, a new low since the end of January this year; COMEX copper stocks fell for six consecutive weeks to 187,500 tons, a new low this year; and copper stocks in the previous period have been reduced by nearly 130,000 tons
since the end of June.
The explicit inventory of the three major exchanges was 542,000 tons, down about 34%
from 820,000 tons in early June.

In addition, the Shanghai bonded warehouse fell for five consecutive weeks, including a decrease of 43,500 tons last week, with a total of 410,000 tons, down 123,000 tons
from the same period last year.
According to Shanghai Nonferrous Metal Network, the recent US dollar copper market in October QP has been difficult to find, the premium performance is crazy, the high quotation has soared to 120 US dollars / ton, a new high in the year, can be described as a difficult to find
.

In terms of copper scrap, since 2018, affected by the domestic copper scrap policy, the import approvals for restricted copper scrap have been greatly reduced, and as of September, 19 batches have been announced, with a quantity of 738,700 tons, a year-on-year decrease of 75.
43%.

Since the beginning of this year, the import of scrap copper has decreased significantly, and the implementation of the policy has increased significantly, and customs data show that the cumulative import volume of scrap copper from January to July was 1.
3597 million tons, down 36.
45%
year-on-year.
In addition, China imposed a 25% tariff list on $16 billion of U.
S.
products on August 23, including copper scrap, and the increase in the cost of scrap copper imported from the United States is a foregone conclusion, which may cause the share of copper scrap imported from the United States to shrink to zero, and copper scrap imports will continue to be blocked, accelerating the tight pattern of domestic scrap copper supply
.
In addition, affected by the Sino-US trade war and the strong US dollar, copper prices have fallen significantly since June, and the refined waste spread has continued to narrow
.
The substitution of copper scrap for refined copper continues to weaken, supporting the consumption
of refined copper.

Overall, the $200 billion tariff boots landed, investors' worries were released ahead of schedule, and the growth rate of domestic infrastructure investment is expected to pick up
.
Domestic spot maintains a back structure and high premium, the proportion of warehouse receipts to unilateral positions has been close to a multi-year low, spot merchants' replenishment demand before the National Day still supports the rhythm of destocking, copper prices are likely to continue to rise, the target price is 51500-52000 yuan / ton
.