After the LME London annual meeting, "China's demand exceeded expectations" and "the global mine production peak has passed" two major views began to spread in the market. Next, the author will focus on copper processing materials, trying to sort out the entire downstream consumption structure of copper, and verify the view that China's copper demand is picking up.

As we all know, copper processing materials are divided into copper rod wire, copper strip, copper rod, copper tube, copper foil, etc. According to the latest data of SMM, they account for 53%, 13%, 13%, 12% and 2% of copper consumption in processing plants respectively. The use of copper strips and copper rods is more scattered, temporarily unable to track the downstream consumption of copper strips and copper rods, so the author only analyzes the total 67% of copper rod wire, copper tube and copper foil.

Copper rod wire is mainly processed into power lines, construction lines, automotive electronic lines, communication lines, bare wires and enameled wires, according to the International Copper Association data, accounting for 38%, 25%, 6%, 2%, 5%, 24%. Communication lines use less copper and are difficult to count, and bare wires are used less and less in the erection of high-voltage lines in the field, so they are not tracked.

Unlike most people's guess, power lines are actually more used in the non-grid part, which accounts for only 26%. We tracked the bidding situation of the national network and found that the national network centralized bidding at the end of last month, but the delay in delivery did not boost the current consumption. The non-grid part of the line is mainly concentrated in power plants, substations, industrial and mining enterprises and rail transit. Electricity consumption in the mining industry increased by 1.39 per cent year-on-year in October, and the growth rate has turned positive this year; electricity consumption in heavy industry increased by 4.4 per cent year-on-year, an increase; and rising electricity consumption has given a boost to power line consumption. In 2016, the cumulative mileage of key railway projects in China was about 14000km (some phases of the line have been completed and opened to traffic), and the total estimated cumulative investment was about RMB 1.67 trillion. The continuous high investment in railways has greatly promoted the consumption of copper (contact network).

Different types of buildings will lead to different density of copper used in buildings. Due to the growth of electricity demand, the density of copper used in various types of buildings has been increasing in the past few years. As of October, the cumulative completed area of residential, office and commercial premises was 5.7 percent, -4.4 percent and 4.6 percent, respectively, year-on-year. Although the copper density of office buildings is higher than that of residential buildings, the overall completion and improvement of houses this year and the larger base of residential area have increased the demand for building wires and become the main contributor to copper cable consumption.

Car production in October was 2.409 million, up 18 per cent from a year earlier and down 6.5 per cent from a year earlier. At present, there is still one and a half months to go before the end of the policy of halving the purchase tax introduced last year. During the National Day, many places rushed to catch the last bus, and the sales of small-displacement cars increased sharply, which led to the overall rise of the auto market.

Copper consumption in enameled wire accounts for more than 10%, from large to small: transformers (34%), household appliances (25%), motors (18%), automobiles (10%). In October, the output of air conditioning, refrigerators, washing machines and color TV sets increased by 19.2, 27%, 3.4 and 9% respectively.

The output of AC motors in August was 23.798 million kW, up 3.1 percent year on year. The expected output of distribution transformers this year is higher than the same period last year.

More than 80% of copper pipe consumption comes from air conditioning. Since July, the air conditioning plant has been scheduled to produce more than the same period last year. Domestic sales first suppressed and then rose, September year-on-year improvement, channels to supplement the stock and this year's Spring Festival ahead of schedule, air conditioning plant production and stocking performance is positive. Although export sales have fallen but still higher than the same period last year, export sales this year's bright performance to make up for the first half of the domestic sales downturn.

Copper foil is a bright spot in the downstream consumption of copper in recent years, mainly used in lithium batteries and printed circuit boards. In October, China's lithium battery production continued to maintain rapid growth, an increase of 54.6. Printed circuits have not increased for two consecutive years.

In summary, from the perspective of copper processing materials, China's copper consumption has indeed improved. The impact of the new real estate policy on copper consumption is expected to begin to appear in the second quarter of next year. If the consumption growth rate in other areas in the first quarter can continue to be maintained, it is expected that copper prices in the first quarter will still have some support in terms of consumption.