According to Hexun futures, under the background of monetary easing and supply disruption, the time window for the sharp fall of copper price has not yet arrived. At present, it is in the low-season of downstream consumption, and the relationship between the two countries is tense. The short-term sharp rise may be relatively small. In the short-term, it should be mainly high-level fluctuations, with the range of 50000-53000.

    I. Market Review

    Looking back on the market in July, copper prices rose by 6.21% this month. In the first ten days of this month, Shanghai copper continued to speculate on supply disturbance and monetary easing, resulting in a sharp rise in Shanghai copper; in the second half of this month, due to the sudden tension in trade relations between the two countries and the superposition of consumption off-season, the downstream consumption was weak, and the spot premium declined. Under the intertwined multi space situation, Shanghai copper mainly operated in shock mode.  

    2、 Macro aspect

    1. China's economy will slow down in 2020, and the infrastructure policy will provide some support. In 2020, the economic growth center may continue to move downward, but the downward slope will be significantly shallower than that in 2019; the main macro indicators generally lack flexibility and trend. It is expected that the growth rate of investment will decline slightly. Among the specific sub items, real estate investment will go down and manufacturing investment will grind to the bottom; constrained by debt pressure and fiscal balance of payments and other constraints, the space for infrastructure hedging may be relatively limited. Inflation may have some support for consumption growth and the base for export readings. We should continue to dilute the total amount and strengthen the structure; the total amount of the "old economy" lacks bright spots; we should look for opportunities in the structural optimization; the new economy is like a spark, leading the direction of the times. Among them, the rapid growth of high-tech industry and the upgrading of low-line consumption structure are worth further exploring. New economy related industries, investment and financing, profitability and other aspects, performance is significantly better than traditional industries. At the same time, the structural optimization continued to advance. On December 10-12, the central economic work conference was held. It was proposed to guide funds to invest in advanced manufacturing, people's livelihood construction, infrastructure short board and other fields. In 2020, the "big infrastructure" may become an important driver of stable growth. According to the data of the National Bureau of statistics, from 2003 to 2011, China completed a total of 14.4 trillion yuan in fixed assets investment, with an average annual growth of 25.6%. In 2020, the central government set the "big infrastructure" as a driving force for steady growth.

    2. The U.S. economy may have reached its peak in 2020: it is estimated that the U.S. economy will decline first and then stabilize, with an increase of about 2%, and the probability of stock market adjustment will be relatively large. The stimulating effect of tax reduction policy on consumption will continue to weaken, but tax reduction will lead to the increase of fiscal deficit rate, the growth rate of national debt balance is higher than the growth rate of nominal GDP, and the ability of fiscal expansion to the economy is limited. In addition, due to the decline in consumption, the destocking cycle has not yet ended, and the investment growth rate will continue to slow down, which is expected to stabilize in the middle of the year as soon as possible. The decline after the peak growth rate of employment growth and consumer borrowing is often the end of the most prosperous period of the economy and the beginning of stock market adjustment

    3、 Supply and demand analysis

    1. Balance of supply and demand

    Supply and demand situation of global refined copper: there is surplus in the whole year. According to ICSG, the international copper research group (ICSG) said in its latest monthly report that the global refined copper market was short of 86000 tons in April and 3000 tons in March. SMM: the global refined copper market was short of 86000 tons in April and 3000 tons in March, according to the international copper research group (ICSG) in its latest monthly report. ICSG said the refined copper market had a surplus of 59000 tons in the first four months of this year, compared with a shortage of 181000 tons in the same period last year. In April, the global refined copper production was 1.98 million tons and the consumption was 2.07 million tons. In April, there was a shortage of 131000 tons of copper in China's bonded warehouses, compared with a surplus of 2000 tons in March. According to a report released by the world Bureau of Metal Statistics (WBMs) on Wednesday, the global copper market is short of 18000 tons from January to may 2020, and 267000 tons in 2019. During the first quarter, the reported inventory increased, but fell slightly in April and may, with the reported inventory at the end of May increased by 170000 tons compared with the end of December 2019. The increase includes the net delivery of 111000 tons to LME warehouse and 17600 tons of increase in Comex inventory. From January to may, Shanghai's inventory increased by 21400 tons.

    2. Supply side

    (1) the grade of copper ore has decreased significantly, and it will still show a downward trend in the future. A study by mining information company shows that the reserves of the next generation copper mine will not only be reduced, but also the copper grade will be greatly reduced. At present, the average grade of the mined mines is 0.53%, while that of the copper projects under development is 0.39%. From 2006 to 2020, the average grade of copper ore mined continued to decline. (2) Copper production capacity growth slows down, copper utilization rate will remain high, copper price leads the change of capital expenditure by 1-2 years, while capital expenditure is 5-7 years ahead of concentrate production. Capital expenditure peaked in 2012 and copper production capacity growth peaked in 2016. According to the statistics of the main production increasing mines in the future, 600000 tons and 430000 tons will be increased in 2019 and 2020 respectively; from the current benchmark, the increment is gradually shrinking. It is estimated that the annual growth rate of global copper concentrate production capacity will remain above 1.0% in the next two years. Since 2018, the mine utilization rate has been maintained at more than 80%, which is at a historical high. The high price of copper leads to the rapid recovery of mineral resources.  

    3. Demand side

    (1) In the second half of the year, UHV accelerated and the power grid stabilized in the second half of the year. From the perspective of terminal demand, a total of 165.7 billion yuan of grid investment was completed in June, up 0.7% year-on-year. In 2020, UHV will be restarted and consumption is expected. Under the stimulation of UHV policy for 20 years, the consumption of power grid will stabilize. (2) In terms of air conditioning, the growth rate slowed down in 19 years and slowed down in 2020. In terms of air conditioning, the cumulative growth rate of air conditioning production decreased by 16.4% from February to June, with the output of 104.14 million units. Air conditioning data in 2019 will remain relatively strong, but the growth rate will decline compared with that in 18 years. Home appliance fees lag behind in the real estate market, and the sales of real estate market in 2019 will slow down. It is expected that air conditioning consumption will continue to be weak in the second half of 2020. (3) In terms of automobiles, the total output in June 020 was 10.11 million, down 16.5% year-on-year. With the increasing saturation rate of China's automobile market and the decline of household savings rate, automobile consumption will continue to remain low in 2020, and the effect of policy stimulus will not be obvious. (4) In terms of real estate, from 2020 to June, the accumulated sales area of commercial housing is 694.03 million square meters, a year-on-year decrease of 8.4%; the newly started area of real estate is 97536 square meters, a year-on-year decrease of 7.6%; the investment in real estate is 6278 billion yuan, down 1.9% year-on-year. The real estate market is relatively stable in 2019, and it is expected that the growth rate of real estate in 2020 may decline significantly.

    4. Cost side

    The decline of production cost of copper concentrate enterprises slows down. In 2019, the average cost of copper mine of the world's major miners does not change much. For copper prices, it is difficult to rely on miners to reduce costs to bring profits. As time goes on, the decline of copper grade is a common problem, which has an upward trend for the overall cost change of primary refined copper They believe that the cost of Chile's copper mines should be roughly similar. Most of the mine costs can be reduced to less than 3500 US dollars per ton, so they can be subject to a price of 3500 dollars per ton. It is estimated that in 2020, the cost of copper concentrate will increase due to stricter environmental monitoring and lower quality of Chilean mines.  

    5. Inventory

    Global copper inventory: the dominant inventory remained low, and the domestic inventory accumulated. As of July 31, the global large exchange inventory, LME inventory of 128000 tons, SHFE inventory of 159000 tons, Comex inventory of 89000 tons, global dominant total inventory of 376000 tons, bonded warehouse inventory of 211000 tons.  

    4、 Copper market

    The overall operating rate of 2020 copper market will decline more than that of last year. For one thing, due to the epidemic situation, copper rods will remain relatively stable under the stimulation of ultra-high pressure, and other copper consumption may continue to maintain a downward trend. At present, from the weekly K line of Shanghai copper index, Shanghai copper has taken a V-shaped trend in the first half of the year. At present, from the beginning of 2018 to now, Shanghai copper has gone through an interval of fluctuation, the upper edge of the downward market, and the volatility is gradually reduced. At present, around 52000, there is strong support for short-term 50000. At the same time, the trading volume near 53000 is relatively large, which is difficult to break through in the short term. Shanghai copper is expected to focus on the 50000 ~ 53000 area Intermittent vibration is the main factor.

    V. summary

    1. From the perspective of supply and demand, there will be a pattern of oversupply in 2020. The supply side will get better in the second half of the year. Chile and Peru will increase the resumption of production. With the stabilization of copper concentrate processing fees and the rebound of crude copper processing fees, the profits of domestic copper smelting will improve, and the risk of production reduction will decrease. The refined copper supply will slowly recover, and the global consumption at the demand side will continue to anchor.  

    2. From the cost side, the acceptable cost of the mine is about 3500 US dollars / ton, and there is little room for the mine cost to further decline. The mine still has a relatively large profit space for the current copper price. The mine output will not be greatly reduced in a short period of time, and even there is an upward range. However, the increase of environmental protection and the decline of copper mine quality will also increase the mine cost.  

    3. From the macro-economic perspective, the global central bank has increased the money supply, the money is loose, and the liquidity is good. In addition, the resumption of work and production in the second half of the year will improve the overall macro-economy, and the macro mood will continue to improve.

    The copper price of the two countries is mainly in the short-term fluctuation range of 53000 ~ 50000, which is not the main short-term fluctuation of copper price. 4.

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