The game between long and short sides continues Copper prices will maintain a weak pattern

In terms of wire and cable, the growth rate of investment has fallen sharply this year, and we expect it to be difficult to increase
.
From January to October, the investment in power grid engineering was 381.
4 billion yuan, down 7.
6%
year-on-year.
Although the scale of grid investment is expected to expand in 2019 under the guidance of national policies, we believe that the demand for copper may be limited
.
On the one hand, the construction of China's distribution network has been gradually improved, which means that it is difficult to increase the margin; On the other hand, a new round of UHV planning has been implemented, but UHV is dominated by steel-core aluminum stranded wires, and the copper density must be lower than that of distribution network cables
.

In terms of real estate, from January to October, the sales area of commercial housing nationwide increased by 2.
2% year-on-year, and decreased by 3.
1% month-on-month; The cumulative area of new housing starts increased by 16.
3% year-on-year, slowing down by 0.
1% month-on-month; Cumulative housing construction area increased by 4.
3% year-on-year and 0.
4%
month-on-month.
The demand for copper consumption in China's real estate market is reflected in two aspects: one is the cables and related substation equipment required for real estate construction itself, and the other is the demand for
electrical products brought about by new house decoration.
Under policy pressure and economic pressure, real estate sales began to weaken, but investment and new construction area still maintained a high growth rate, and the area of housing construction also increased
slightly.
According to this, we believe that the downward cycle of real estate has gradually unfolded, although there is a certain time lag in the transmission from the sales end to the investment and construction side, but the decline in sales will further affect the consumption
of home appliances.

In addition, there is a significant divergence between the growth rate of new housing area and the growth rate of completed area, which may be due to the tightening of funds of housing enterprises, which tend to rush to start construction, construction, pre-sale, and return payment, but the continuation of construction after pre-sale still requires funds, so it is not completed in time
.
The laying of cables and related substation equipment is usually completed during the completion period, so the negative growth of the completed area also inhibits
the consumption demand for copper.

In terms of automobiles and home appliances, in the second half of this year, the production and sales of automobiles, refrigerators, microwave ovens and other home appliances have entered negative growth, and the downward pressure is great
.
In terms of air conditioners, domestic air conditioning production and sales in October fell sharply by 20.
4% and 13.
9% year-on-year, respectively, coupled with the drag of weak real estate sales and the pressure on consumption under economic pressure, the later period is still expected to be weak
.
The growth rate of new energy vehicles has also declined, and although the future is expected to improve, the growth rate is expected to slow
down in the later period as the industry gradually matures and the subsidy policy declines.

From the perspective of global inventories, the round of destocking that began at the end of March continues, which is the main factor
supporting copper prices at present.
Smelting capacity in India, the Philippines and, more recently, Chile has been disrupted, and new capacity has not yet been released, leading to a passive demobilization
of global inventories.
The continuous decline in inventories has made the LME spot premium rise for a while, but the recent decline in LME premium has continued to pay attention to
in the later stage.
In addition, on November 2, LME stocks suddenly increased by 44,000 tons, which requires vigilance for the possibility
of hidden stocks.
Domestically, the substitution of refined copper for scrap has accelerated the decline
of inventories to a certain extent.
However, at this stage, the gradual release of domestic production capacity, and the widening of the refined waste price spread may in turn inhibit the consumption of refined copper, superimposed on the weakening of consumption, and the continued sharp destocking is expected to be unsustainable
.
At present, the accumulation pressure of domestic social stocks has initially appeared, currently at 473,000 tons, which has increased by about 10%
from the end of September.

Overall, under the pressure of the domestic and foreign economy, the trend of weak demand is difficult to change, and we believe that the general direction of copper prices remains weak
.
However, in the short term, the interference on the supply side determines the rhythm of the decline in copper prices, and it is operationally recommended to sell short
at the high.