Futures Daily reported on November 16th: Lun copper dropped sharply in November 14th, hitting the 60 day moving average. We believe that despite the short-term decline in copper prices due to weak data released by China, the overall positive trend in China's economy has not changed, and the economies of other major economies are still performing well, which will increase demand for copper in the terminal industry, and copper prices are expected to fall in limited space.
Global economic growth is upregulated
Recently, some of China's economic data are not satisfactory. China's real estate investment growth turned downward, slowing to 7.8% from January to October, and the sales area of commercial housing continued to decline, the growth rate fell more than 2 percentage points from January to September. At the same time, the growth rate of urban fixed assets investment and private investment declined in the previous October. The data show that the national fixed assets investment increased by 7.3% from January to October, the growth rate dropped by 0.2 percentage points from January to September, the private fixed assets investment increased by 5.8% from January to October, and the growth rate dropped by 0.2 percentage points from January to September. However, the market believes that China's overall economic operation remains stable, and the quality of supply-side reforms continues to improve. China's GDP growth is expected to remain 6.8%-7% in 2017.
Other major economies are doing well. The U.S. PPI and core PPI reached new highs since February 2012 in October, suggesting that inflationary pressures in the U.S. have sprouted, the Federal Reserve rate hikes were basically set in December, and the dollar index fell sharply. Strong domestic demand led to economic recovery in Europe, with GDP growth in the euro area meeting expectations of 2.5% in the third quarter, with GDP growth in several ASEAN countries sustained at around 3% year-on-year, and the European Union raised its forecast for economic growth in the euro area from 1.7% to 2.2% in 2017. The rise in global economic growth suggests that there is no risk event in the market, indicating that the trend of basic metal prices is upward.
Fundamentals remain good.
From the perspective of raw materials, we think copper production is slow and copper concentrate is tight. First of all, the grade of copper ore has declined. Since 1990, the global copper grade has decreased from 1.6% to 1%. Chile's large copper mines are aging and the grade is relatively low. It is estimated that the average grade of Chile copper ore in 2017 is 0.71%, which is lower than the average grade of the global copper mine. Secondly, the growth rate of copper capital expenditure slowed down, and the level of copper capital expenditure in 2016 was about 60% lower than that in 2012. Copper prices rose more than 50% between the fourth quarter of 2016 and the end of the third quarter of 2017, without spurring miners to increase capital expenditure substantially. Finally, domestic smelters and foreign mines are about to start negotiations on the 2018 copper concentrate long list, but judging from the lower tender price of traders, we believe that the 2018 copper concentrate long list TC is up to 85 US dollars per ton.
From the perspective of China's copper terminal industry, copper consumption prospects are still optimistic. We believe that the growth rate of investment in infrastructure will be restored and the PPP market will show a relatively rapid growth rate. By the end of October, the nationwide successful PPP projects have reached 8.05 trillion yuan, and the newly completed projects in 2017 have reached 3.58 trillion yuan. Municipal engineering, transportation, ecological construction and environmental protection industries have contributed a larger share.
The supply of the real estate market will improve, and the proportion of affordable housing, common property rights housing, rental housing will increase. From the perspective of the power industry, the copper-related bidding volume of the State Grid in the fourth quarter was significantly better than that of the same period last year. It is expected that the consumption of wire and cable will continue to increase with the improvement of the construction industry. In addition, the overall growth of consumer goods industry has also increased copper consumption.
Conclusion
To sum up, we believe that the overall global macroeconomic upturn indicates that there will be no major risk in the market, and the prices of basic metals remain upward trend. In terms of fundamentals, it is expected that the recovery rate of copper consumption will be faster than that of copper supply, which is conducive to the recovery of copper prices. At present, although the impact of bearish, copper price short-term correction, but we do not think that the space below is very large, we suggest that investors wait for price stability, to buy at a bargain-based.
