The fundamentals of the copper market are performing well, and the probability of a phased recovery is high

China's real estate market has cooled, but investment in the residential sector, which is closely linked to copper consumption, performed well
.
The proportion of residential investment completion in total investment in real estate development continues to soar, which may indicate that the real estate market in third-, fourth- and fifth-tier cities continues to improve
.
In terms of real estate funding sources, the self-financing funds of real estate enterprises have steadily declined, and domestic loans have rebounded slightly, but other sources of funds, including pre-receivables and deposits, personal mortgage loans, etc.
, have risen sharply, indicating that there is greater potential in real estate market demand, which supports the consumption
of wire and cable, household appliances, automobiles and other industries.

In 2018, State Grid promised to invest 498.
9 billion yuan in the power grid, higher than the actual investment of 485.
4 billion yuan
in 2017.
The data shows that the completion of power grid capital construction investment from January to August fell by 13.
70% year-on-year, but historically, the actual investment of the State Grid has not been lower than the promised value, and it is expected that the investment of the State Grid in the second half of the year is still likely
to increase.

The air conditioning industry has not yet reached the cold winter, and the production and sales data of air conditioners in the first half of the year maintained double-digit growth, creating a new historical high on the basis of the high base in the same period last year
.
The market expects the growth rate of air conditioning sales to fall to 0.
8% in the second half of the year, but it will still maintain a growth rate
of 5%-10% throughout the year.

Sales of traditional vehicles decreased by 421,400 units from January to August, but sales of new energy vehicles increased by 320,000 units, partially compensating for the decline
in production and sales of traditional vehicles.
At the same time, the amount of copper used in new energy vehicles is 2-3 times that of traditional vehicles, so the automotive industry will still drive copper consumption
.

There is an expected difference between the short-term and medium-term and long-term copper mine supply, and the short-term shutdown of the smelter in southern India has led to a long-term rush of copper concentrate to the spot market, and the spot processing fee has continued to rise, but the medium and long-term global copper mine lacks sufficient capacity release, and China's smelters are concentrated on production, and the long-term copper concentrate processing fee will weaken
again.

At the same time, the reduction of copper scrap supply is an inevitable event, and the effect of refined copper on the replacement of copper scrap is obvious, aggravating the overall supply of copper
.
The Ministry of Ecology and Environment has significantly reduced the approved imports of waste seven categories, and as of September 28, batches 1-21 recommended to approve the import of 914,800 tons of waste seven categories, down 68.
02%
from 2017.
From the specific import volume, excluding the price increase factor, the import price of scrap copper has begun to fall since May, and the import volume of scrap copper from June to July has not increased significantly, indicating that the import volume of scrap six categories has begun to decrease, suggesting that the six types of scrap have ended
.
Under the influence of China's tightening environmental protection policies, solid waste or total ban on imports, the enthusiasm of scrap copper enterprises to build dismantling plants abroad has dropped
significantly.
There are many restrictions on scrap copper dismantling in China, and the increase in scrap copper dismantling is difficult to make up for the decrease in imports
.

In terms of inventories, copper stocks continued to decline
, affected by good copper consumption and reduced scrap supply.
As of October 5, LME copper stocks stood at 186,800 tonnes, the lowest since a streak of decline in March, while total SHFE copper stocks, at 112,000 tonnes, were also in a state of continuous decline
.
In addition, as of early October, copper stocks in the bonded zone were 388,000 tons, down 35,000 tons
from early September.

Overall, copper fundamentals are performing well, inventories continue to decline, and copper prices will encounter certain resistance
.
If the external risk can be reduced, the probability of copper price recovery in stages is higher, and it is recommended that investors tentatively go long
in the range of 48,000-49,000 yuan / ton of Shanghai copper 1812 contract.