As the supply of copper ore exceeds expectations and is digested by the market, the continued improvement in the copper end consumer industry will support the recovery of copper prices. Shanghai copper 1806 contract 50500 yuan / ton near the strong support, it is recommended that investors refer to this position to establish more than one single.

Recently, Lun copper has fallen slightly. We believe that the negative impact of copper supply exceeding expectations on copper prices has been realized. Continued improvement in the terminal industry in the later period will support the continued recovery of copper prices.

Copper supply exceeding expectations has been digested

The global production of copper mines resumed rapid growth, and global copper production is expected to increase by 3.5% year-on-year in 2018, down from 1.7% year-on-year in 2017. First, recovery of production of Escondida copper mine exceeded expectations and output of Chilean copper mine increased. Second, Chile’s major copper mines reached a labor agreement, and the possibility of strikes on copper mines declined. Chile’s Ministry of Mines is more optimistic about Chile’s copper production in 2018. It is estimated that annual production will increase by 3.5% to 7.2% year-on-year. Thirdly, the profits of major global mining companies will increase substantially in 2017. The increase in mining capital expenditure in 2018 will promote the expansion of existing mines and the production of new mines. We believe that the market has digested the news that copper supply exceeded expectations. Copper prices have fallen deeper in the first quarter. In the later period, we should focus on the supporting role of end-consumer prices.

The main national economic data is still bright

The U.S. manufacturing and real estate industries continue to improve, and it is expected that the economic growth rate will increase. Data show that the United States in April Markit manufacturing PMI initial value of 56.5, the highest value since December 2014, higher than the expected value of 55.2 and March final value of 55.6. Among them, the April output order index rebounded to 56.4, the highest in 15 months. In addition, in March, the total number of existing homes sold in the United States was 5.6 million, which was better than the expected 5.55 million. The sales in the northeastern and central United States grew strongly. The market expects that in 2018, the annual GDP growth of the United States will reach 2.5%, which is higher than the growth rate of 2.3% in 2017.

The euro zone's manufacturing industry has continued to expand and the economy has room for improvement. In the euro area, the initial manufacturing PMI for April was 56 which was lower than the expected value of 56.1 and the previous value of 56.6, which was a 14-month low. However, the continuous rise in the capacity utilization rate in the euro area's manufacturing industry indicates that the euro zone's manufacturing industry is digesting the previous orders. At the same time, as the engine of economic growth in the euro zone, Germany’s initial manufacturing PMI for April was 58.1, which was higher than the expected value of 57.5.

China's manufacturing industry has steadily increased and the economy continues to grow. In March, China's official manufacturing PMI was 51.5, which was 1.2 percentage points higher than that in February. The production index was 53.1, up 2.4 percentage points from February, indicating that manufacturing companies have started to concentrate after the Spring Festival and the overall production has risen steadily. China’s GDP growth in the first quarter was 6.8%, which was in line with market expectations and demonstrated the stability of China’s economic growth.

China's end consumer industry overall improvement

China's copper consumption accounts for 50% of the world's total. China's end-consumer industry continues to improve and will increase copper demand. In terms of power grids, the State Grid promised that the power grid investment in 2018 will reach 498.9 billion yuan, which is higher than the actual investment of 485.4 billion yuan in 2017. The investment in the transmission grid with less copper consumption will remain stable, while the power distribution with more copper will be used. Net investment increased. In terms of infrastructure, with the gradual warming of the weather, major domestic infrastructure projects have started construction. In March, sales of large excavators increased by 100.5% year-on-year, ending the sharp drop in sales growth in February.

With regard to real estate, with the completion of inventory deregulation in China's property market, real estate prices have steadily rebounded. In March, the price of new commercial housing in 70 large and medium-sized cities increased by 0.4% month-on-month, which was larger than the 0.2% in February. At the same time, it is expected that the increase in investment will drive real estate supply. From January to March, investment in real estate development nationwide increased by 10.4% year-on-year, an increase of 0.5 percentage points from January to February.

In addition, the output of air conditioners continued to grow at a high rate. In April, domestic household air conditioners produced approximately 16.71 million units, an increase of 16% over the same period of last year. Among them, domestic sales increased by 18.5% from the same period of last year, and exports increased by 9.4% over the same period of last year.

On the whole, as the supply of copper ore exceeds expectations, the market will continue to recover, and the continued improvement in the end-use industry of copper will support the recovery of copper prices. From a technical point of view, the Shanghai copper 1806 contract near 50,500 yuan / ton strong support, it is recommended that investors set up more than one short-term reference to this position.