In late June, the copper price continued to adjust greatly, the power of the adjustment comes from several aspects: first, the domestic seasonal consumption low season adds the domestic economy growth speed to hit the peak, the high copper price appears the obvious abate; Second, the domestic credit pulse to fall back, credit tightening asset prices to squeeze bubbles; Third, the U. S. inflation and economic recovery under the currency reversal expectations. May weak investment, copper domestic demand continued to fall, from the demand side, the author through the observation of three major areas of investment to measure copper demand. Among them, real estate and manufacturing investment to copper consumption pull is the biggest. In the real estate sector, the cumulative growth rate of real estate investment fell to 18.3% from January to may, down 3.4% from January to April. Real Estate Investment slowed to less than 10 per cent year-on-year growth in May, to 9.8 per cent, from 13.7 per cent in April. Statistics found that after the global financial crisis in 2008, the correlation between the cumulative real estate investment growth rate and the closing price of the active Shanghai copper contract was as high as 0.75. Therefore, the slowdown in the growth rate of real estate investment means that the round of real estate leverage is over, strong demand for copper is starting to wane. Will real estate remain resilient in the future? The author believes that with the tightening of regulation, a new round of real estate tax pilot, residents to increase leverage to end the high turnover model is difficult to maintain, real estate investment will continue to fall. This can be verified in the following ways. First, the real estate development enterprises to take the area is decreasing, with the high turnover model of the completed area increased, available for new construction of land shortage, real estate investment will naturally decline. From January to May, the area of land purchased by real estate development enterprises fell by 7.5% year-on-year and by 31.6% year-on-year in May. Second, the sales area of commercial housing growth in the fall. With the government's three red lines on the real estate, the concentration of real estate loans on the requirements of cracking down on operating loans and other regulatory measures continue to fall or show results, the high turnover model of real estate may be difficult to maintain. From January to May, the cumulative growth rate of commercial housing sales area dropped to 36.3% , 1.8 percentage points lower than that in January to April. Sales of commercial housing fell to 9.2 per cent year-on-year in May, down from 19.2 per cent in April and 9.7 per cent during the epidemic last year. Third, the source of real estate development funds in the year-on-year decline, which means that the development of real estate funds will gradually increase the pressure. Funding for property development slowed to 14 per cent year-on-year in May, down from 19.6 per cent in April and the lowest since July 2020. Private mortgage loans, a source of financing for property development, grew just 4.3 per cent in May from a year earlier, down from 22 per cent in April. As for investment in the manufacturing sector, investment in high-tech manufacturing is growing faster in the case of the upgrading of the manufacturing sector, but the growth rate of investment in the traditional manufacturing sector is falling back, policy Stimulus and partial policy exit, debt pressure and raw material cost pressure on the closure of enterprises to slow investment. From January to May, the cumulative growth rate of manufacturing investment dropped to 20.4% year-on-year, 3.4 percentage points lower than that of January to April, and the growth rate of investment in May also dropped to 13.5% . As for infrastructure investment, the growth rate of infrastructure investment, excluding electricity and other infrastructure investment, also dropped to 11.8% year-on-year from January to May, despite the delay in the issuance of special bonds and the slowdown in fiscal expenditure, it was 6.6% lower than in january-april. May saw a negative year-on-year increase in infrastructure investment of-2.5 per cent. In May, retail sales of consumer goods totaled 3,594.5 billion yuan, up 12.4 percent year-on-year. The growth rate was 5.3 percentage points lower than that in April, and 9.3 percent higher than that in May 2019. The two-year average growth rate was 4.5 percent, slightly higher than the two-year average growth of 4.3 percent in April. From the structural point of view, motor vehicles, communications equipment and other durable goods in general performance, with residents living radius-related food and beverage, clothing, tourism, cosmetics, daily necessities and other recovery further accelerated. In the case of higher growth in real estate completion area, sales of commodities related to the post-real estate cycle are better. Household appliances grew 3.7% in May, better than the previous figure of-1.5% . Furniture grew 7.7% , up from 7.3% . Decorative materials grew 10.7 percent, slightly less than the previous 11 percent.

As the current copper market and the macro-economy are similar to those of 2009-2010, comparing the current copper price peaking with the copper price peaking in 2011, we find that the conduction logic of copper price peaking, economic peaking and monetary policy peaking, the copper market adjustment can be divided into four stages. The first stage of monetary policy peaking tends to precede the economy peaking, so copper prices tend to hover at high levels without going higher, as in the third quarter of 2010 when China's M2 growth rate began to decline, but copper prices continue to soar or hover high. The second stage is when the economy peaks and copper prices kick-start a deflationary bubble, as they did in the second quarter of 2011. Take the first quarter of 2011. China's real GDP growth peaked in the first quarter of 2011 at 2.6 per cent on a month-on-month basis, while copper prices tumbled back after hitting a high of 77,280 yuan per tonne on February 15. In the third phase of copper market equilibrium, the decline of copper price is accompanied by the destocking of enterprises, and the demand may rebound periodically due to the decline of copper price, and the adjustment of copper supply lags behind. For example, copper prices continued to fall in 2011-2015 and 2018-2019, but the decline in 2018-2019 was mainly due to deleveraging and trade friction between China and the United States, not an endogenous recession, so copper prices did not decline as much as in 2011-2015. The copper market completed the rebalancing of supply and demand and finished destocking in the fourth stage, and copper prices hit bottom, for example, in the first half of 2016 and the second quarter of 2020, during which both the copper market finished destocking and the supply side was contracting, demand side in the real estate and the case of the rise in leverage. The author believes that the current copper market adjustment is still in the second stage. The main clues include: First, the M2 peak of China's money supply appeared in the fourth quarter of last year, but the high point of economic growth was in the second quarter of this year, so copper prices have entered a deflationary bubble correction, and the mismatch between supply and demand caused by overseas demand has improved, with the Federal Reserve about to announce QE cuts. Market Research, from the short-term logic point of view, the copper market downward adjustment trend has no differences, but differences lie in the extent of the adjustment. Judging from the transmission logic of copper price peaking, economic peaking and monetary policy peaking in history, the current copper market adjustment has entered the second stage (bubble-like Adjustment Stage) , the main clues include: First, China's money supply M2 peak in the fourth quarter of last year, but the high point of economic growth in the second quarter of this year, so copper prices into the Squeeze Bubble Adjustment Stage; Second, the mismatch between supply and demand caused by overseas demand has improved, and the Fed is about to announce a reduction in Qe. Of course, the price of copper is currently in a bubble-like adjustment stage, but it is not clear that the price of copper has turned into a bear market: first, judging from the current economic growth, as the economy is recovering relative to 2019, economic growth may be slightly higher than the potential growth rate, the copper market will not be more than the intensity of the bubble in 2011; Third, the global green transition and domestic "double-carbon" policy of copper consumption growth has not been verified. 

Source: Non-ferrous metal, by Cheng Xiaoyong