SHANGHAI, Mar. 28 (SMM) – Global copper supply is expected to tighten due to strikes at copper mines, which is a top focus in early 2017. Market players thus re-estimate copper prices in 2017 and copper supply is a key of prediction. Copper price has been hovering at highs for a long term and market players are wary of investment in copper market due largely to unclear demand. With entering peak-season, how will downstream demand improve and will copper consumption keep outperforming in electric power industry in 2017? Besides, market players also pay close attention on inventory replenishment at enterprises. Let’s see what experts said on SMM 2017 Copper&Aluminum Summit on March 24.
Is there any substantial influence on copper supply at present?
Mao Yiwei, COO of Jiangxi Copper Corporation International Trade, said that TCs for copper concentrate have declined below USD 60/mt, a sign of tight supply. However, it is unclear on copper supply and demand in whole year of 2017 yet. Global copper concentrate supply is expected to see a slight surplus in 2017 but there are accidents.
Copper concentrate output reduction, resulted by accidents, missed market expectation in 2016, resulting in ample copper concentrate supply. However, output expansion will not be smooth as last year in 2017 and there is a big probability for producers to recover output to normal level. Copper supply will be tight balance in 2017.
Does demand improve in peak season according to current orders? What is status quo of consumption?
Wang Shengfeng, Deputy Manager of Jiangsu Zhongguangrun New Material Technology, indicated that magnet wire demand has been brisk in 2016 and is more decent in 2017 with booming demand in home appliance industry (a large amount of home appliances needs to be replaced after housing system reform in 1998), urbanization construction and new house. Home appliance demand, including electric machinery, air-conditioner and refrigerator, increases sharply in recent years, boosting magnet wire demand.
In electric power industry, orders at leading electric wire producers are decent but the growth is lower than that in previous years. Market shares of copper scrap started rising in low-voltage wire industry from last year. I keep reservations on this.
Copper demand will increase by 1-2% in China in 2017 due to huge economy.
Do enterprises replenish stocks after copper price increased? How enterprises decide to replenish stocks?
Wang Shengfeng said that business operation at copper plate/sheet, copper wire rod and downstream producers are divergent, resulting in different conditions on replenishment. Many producers, selling inventories as copper price increasing to around RMB 40,000/mt last year after diving, are unwilling to replenish stocks again. This, combined with product structure update, leads to low inventories at copper rod and downstream producers. Condition is same at copper plate/sheet producers and copper smelters. Those producers, selling inventory for profits previously, should replenish stocks based on enterprises’ conditions due to high costs. Risk is high on exposure front.
How will copper consumption develop in the future?
Liu Hui, Deputy Manager of Foshan Huahong Copper Tube, indicated that orders are decent from the beginning of 2017 thanks to improving real estate market in 2016. Liu expects copper consumption to rise while maintain stable with promotion of 13th Five-Year Plan and One Belt & One Road Initiative.
How is copper consumption in electric power industry and how will it develop in 2017?
Cai Hao, Deputy Manager of East Material Trading Center, said that market players are confused that why investment from State Grid Corporation of China saw negative growth in Jan.-Feb.?
According to a series of data, State Grid Corporation’s 2017 investment plan is 6 percentage points higher than it in 2016 but is 6 percentage points lower than actual investment in 2016, indicating a positive electric power market in 2016. Copper price dropped at first and then rallied in 2016, same as grid investment and electric power system.
State Grid Corporation of China’s actual investment exceeded 12% of plan in 2016. The company plans lower investment in 2017, showing its wary sentiment on electric power industry in 2017. Bonus is used up in recent two years and new market regulation is under bottleneck period.
There is also some positive news, such as rural power grid transformation and upgrade, new energy market development (positive PV power market and improving new energy automobile market) and environmental protection in 2017 and investment may be shifted to western China.
What is status quo of copper industry at present?
Cai Hao pointed out that electric power industry met resistance at beginning of 2017 Chinese New Year but started rising in late February 2017. Performance at leading enterprises is flat at last year’s level or rises slightly in 2017. But, we learn that performance at some copper wire & cable producers is poor and copper rod output drops.
On grade front, medium voltage wire market, occupying half of market shares in electric wire & cable industry underperforms in 2017 due to falling real estate market and tightening liquidity. But it will not decline sharply with positive news.
What’s your prediction on copper price in 2017?
Mao Yiwei indicated that personally, copper price will be positive as keynote but be wary due to uncertain factors.
Wang Shengfeng expects average copper price to be at RMB 46,000-47,000/mt in 2017.
Liu Hui pointed out that there are many factors will affect copper price. First, on demand front, copper demand will increase gradually due to excellent performance. Second, copper cathode capacity is increasing. Third, there are uncertain factors, such as politics, strikes in Chile and Indonesia. Fourth, financial attribute will also affect copper price. Liu is positive and wary of copper price in 2017 and expects copper price to not drop or increase sharply.
Cai Hao expects copper price to increase at first and then decline in 2017 with positive and wary sentiment.
First, demand is negative, especially in electric wire & cable industry. China proposed supply-side structural reform, which not only cuts supply but also reduces demand, as supply and demand cannot be separated from each other. So, output at downstream producers may not increase after upstream producers cut output.
Second, downstream demand is pessimistic, especially in electric wire & cable industry. The price is decided by supply-demand relationship on real economy front. But, as copper growth is much lower than that of ferrous metals, it will keep rising with financial attributes. So far, copper price has advanced to RMB 42,000/mt in 2017 and some enterprises should leave exposure when the price drops below RMB 41,000/mt. Copper price has entered rising territory and entity enterprises should seize the opportunity.
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