Market capital is tightening, and the copper market is under short-term pressure

However, copper fundamentals turned good in the second quarter, and the medium- and long-term support for copper prices remained strong
.
Technically, after copper prices fell below the 60-day moving average, the downward momentum was suspended
.
We believe that the medium- and long-term bullish pattern of copper prices has not changed, and investors are still mainly long-selling dips
.
There are two fundamental factors supporting copper prices: first, the supply of copper ore is tight, and second, there are still bright spots
in terminal consumption.

Copper mine supply concerns remain

Chile's Escondida copper mine, the world's largest, has been in the spotlight
since the February 9 strike.
So far, the mine has been on strike for more than 40 days, and there are big differences
between labor and management on key issues such as wages and benefits.
Although the copper miner accepted the old contract and resumed work last Saturday, given that the resumption period of the large copper mine is about two weeks, the mine is expected to return to normal production levels until at least mid-April, with an expected reduction of 160,000 tons
.
It should be noted that the issue of labor contracts at the mine may turn into a long-term problem, and the two sides may start negotiations again within 18 months, which will increase the uncertainty
of the future supply of global copper mines.

At the same time, the production status of the Grasberg copper mine in Indonesia still needs attention
.
Although the mine resumed production on March 21, production is only 40% of its total capacity, about 20,000 tons/month, and the copper concentrate produced is to meet domestic PT Smelting demand
.
There is no timetable
for the release of the remaining 60% of copper.
Due to policy reasons, the contradictions between the government and mines in the later period may still intensify, which will become an important factor limiting the supply of
copper concentrate.

Overall, copper concentrate production has been disrupted, with an additional impact of 600,000-800,000 tonnes
expected to occur throughout the year.

There are still bright spots in China's terminal consumption

Copper is used indirectly in real estate construction, completion, and renovation, the most important of which is the power cable and home appliance industries
.

The real estate market continues to recover
.
Affected by the expectation of rising house prices, real estate development investment from January to February was 985.
4 billion yuan, a year-on-year increase of 8.
9%, an increase of 2 percentage points over last year; The area of real estate land acquisition increased by 6.
2% year-on-year, the first time since November 2014 that it turned from negative to positive
.
In terms of power grid, investment in power transmission and transformation projects and agricultural distribution networks has increased, and it is expected that the actual power grid investment will exceed 500 billion yuan
in 2017.
According to the grid development plan, the number of charging stations by 2020 will increase by 40%-50% compared with the cumulative number as of 2016 to support the development of clean energy, which will increase the demand for power cable laying
.
It is expected that with the advent of the power grid order delivery date, the power cable operating rate will rise to 81.
80% in March, higher than the same period
in 2016.

The increase in the price of home appliances has provided impetus for the production of home appliance companies, and industry online data shows that household air conditioning production in February increased by 66.
2% year-on-year, and sales increased by 71.
6%
year-on-year.
March is the peak consumption season, and production of home appliances such as air conditioners, home appliances, and washing machines is expected to remain high
.
In terms of automobiles, residents in third-tier cities and below have strong demand for cars, which will continue to drive automobile production
in the later period.

To sum up, copper prices maintain a long pattern in the medium and long term, and it is recommended that investors mainly retrace and go long
.
Short-term price retracements can expand the profit-loss ratio and create a good entry point
for investors.