Analysis and Prospect of Supply and Demand in Copper Market at Home and Abroad

In recent years, global copper production (including China) has steadily increased slightly, but declined in 2017 to 2.1 million metal tons, down 1.22% year-on-year. Copper ore production includes copper concentrates, wet copper smelted directly from copper mines, and copper content of other associated ore.

In western developed countries, the main consumer sectors of copper are electronics, construction, industrial machinery, transportation, and consumer goods. In China, the main areas of copper consumption are power cables, air conditioners, construction, transportation (including automobiles), electronic consumer products and others.

In recent years, global refined copper consumption has grown steadily, mainly driven by China. CRU estimates that in 2017, global refined copper production was 22.85 million metal tons, up 2.5% year-on-year. In 2017, among the world's three major consumer regions, Asia's refined copper consumption was 16.4 million tons, up 3.87% year-on-year, especially in China, contributing to global consumption growth. Europe's consumption was 3.583 million tons, down 0.6% year-on-year; North American consumption 222.8 Ten thousand tons, an increase of 0.45% year-on-year; African consumption increased slightly, but the base was too low, less than 200,000 tons; South American consumption was 424,000 tons, down 9.2% year-on-year.

The overall situation of China's copper supply and demand is "a lack, four first, one lack", that is, copper resources are seriously scarce, external dependence is nearly 80%, copper concentrate, electrolytic copper, copper and other comprehensive dependence on imports; refined copper production and The world's largest production capacity; the world's largest copper processing output and production capacity; the world's first raw material imports; the world's largest copper consumption; the lack of copper price.

China's copper mines are scattered and distributed, with low grades, difficult to select and use, and lack of copper resources. They are heavily dependent on imports. At present, there are few rich ore and large mines.

According to the National Bureau of Statistics, in 2017, China's copper concentrate production of copper was about 1.66 million tons (metal content), an increase of 7.74%. According to the calculation of China's copper consumption of 11 million tons in the same year, even with the domestic waste copper recycling, China's dependence on foreign copper resources is more than 80%.

In 2017, China completed a fixed asset investment of 17.3 billion yuan in copper mines, a year-on-year decrease of 28.31%. Although the two large copper mines (Yunnan Prang and Anhui Shaxi Copper Mine) were put into operation in 2017, the total new capacity was 60,000 tons (metal amount), but it is still a drop in the bucket compared to China's huge demand. Although China's new copper mine projects are still in operation in the next few years, it is still difficult to meet China's huge consumption. It is expected that China's copper resources will still rely on imports for a long time to come.

As we all know, China's copper smelting capacity and output have continued to grow over the years, mainly due to growing demand. Refined copper raw materials mainly depend on copper concentrate and scrap copper. In 2017, China completed a fixed asset investment of copper smelting of 24.16 billion yuan, a year-on-year increase of 26.8%.

Is China's copper supply and demand a gap or a surplus? From the perspective of copper resources, China is undoubtedly a serious gap, but if various forms of copper imports are added, China's copper market is basically in surplus every year. Because, each year, China’s imports basically exceed actual demand. Take 2017 as an example: In that year, China's refined copper output was 8.007 million tons and net import was 2.906 million tons. After the sum of the two, refined copper supply reached 10.913 million tons, while actual consumption was 10.74 million tons, and the surplus was 173,000 tons. In fact, China's refined copper has been in a small surplus for many years.

Facts have proved that from 2016 to 2017, China's economic growth was better than expected, corporate revenues improved significantly, and PPI continued to rise, largely due to the overall improvement of traditional industries, such as steel, coal, petrochemical, and non-ferrous markets. Rising sharply, corporate profits have increased dramatically. Therefore, if China's GDP growth is stabilized above 6.5% from 2018 to 2019, it still needs to rely on these traditional industries, especially infrastructure and new energy, which involve a large demand for energy and bulk raw materials.

CRU expects that in 2018, the global copper concentrate supply gap will be about 146,000 tons, the refined copper supply will be over 127,000 tons, and China's refined copper supply will be about 24,000 tons. Antaike predicts that in 2018, China's copper concentrate will have a surplus of 350,000 tons and refined copper will have a surplus of 40,000 tons.

It is predicted that the LME March copper price will continue to fluctuate within the range from the second half of 2018 to 2019. There is no obvious continuous decline or continuous upward trend. The estimated volatility is USD 6,000/ton~8200 USD/ton. Meanwhile, Shanghai copper price will follow London. Interval shocks. (Principal Analyst of Minmetals Nonferrous Futures Business Unit Zhang Ronghui)