[SMM Analysis] Why is the TC price of refined copper at a historically low level?

SMM, March 30: according to SMM's understanding, the CSPT group held a meeting in Shanghai today, which finalized the purchase price of copper concentrate for the second quarter at US $78 per ton of TC, a decrease of US $9 per ton compared with the first quarter, or 10.3 percent from the previous quarter. The lowest level since SMM statistics.

What caused copper concentrate TC floor prices in the second quarter and spot TC prices fell all the way in the first quarter? SMM thinks there are two main reasons.

Mine production is expected to be tight this year

The copper market has long been a bird of alarm after a strike at the mine's first brother, the Escondida copper mine, last year. About 40 wage negotiations will be held at overseas mines in 2018 to become the focus of market attention. SMM has previously written that it is unlikely that the 2017 Escondida strike will recur this year, judging from recent performance that several of the world's top mining unions, including Escondida, Los Pelambres and Ministro Hales, have agreed or are about to sign new labor agreements. "Please check out the full text: the new labor agreement sets the tone for the 2017 Escondida strike.

But it should be noted that the low probability of a general strike does not mean that there will be no strike, such as this week's forced closure of the Indian copper smelter by Vedanta because of mass protests and the rejection of new labour agreements by workers at Codelco's Radomiro Tomic mine. There are still some variables in the market.

Chile's copper production in February 2018 was 455995 tons, according to the latest release of copper production in February 2018. it has shown a clear downward trend since December 2017, according to the latest release of Chile's copper production in February 2018, Chile's copper production in February 2018 was 455995 tons.

Peru's January copper production of 188509 tons also fell sharply from the previous month.

Domestic smelters plan to expand more

SMM expects China's electrolytic copper production to grow by 5.6 per cent to 8.45 million tonnes in 2018. The growth rate of electrolytic copper smelting production is higher than the expected growth rate of 3.3% of the global copper production.

The expansion of domestic smelters is expected to be significant, with SMM China producing 704200 tonnes of refined copper in February 2018, up 0.47 per cent month-on-month despite the shutdown during the Spring Festival holiday. From January to February, the cumulative output was 1.4051 million tons, an increase of 11 per cent over the same period last year. The increase in output benefited from the increase in refined copper production after the new expansion of the Central Plains Gold smelter and Huludao Hongyue Northern Copper Co., Ltd. at the same time, the output of Jiangxi Copper Department increased in February, with a relatively high year-on-year increase in output. In addition to the new expansion of production capacity to increase production, refinery maintenance significantly reduced compared with the same period last year is also one of the main reasons. So far, it is understood that the 2018 copper smelter overhaul plan will be significantly reduced from 2017.

In the long run, many refineries, including Chinalco Southeast Copper, Yuguang Gold and lead, Jinchang smelter and so on, have plans to expand crude refining capacity in 2018. The demand for mines for the new expansion of roughing is gradually increasing, and the shortage of ore supply is expected to increase in the second half of the year.

Taken together, it is speculated from Chile and Peru that the world's major mining countries have seen a marked decline in production since December and that the expansion of domestic smelters in the first quarter has led to a downward shift in the focus of TC prices, which are now at historically low levels.

SMM believes copper production is expected to be tight this year, while there are more domestic smelter expansion projects, smelting production is expected to grow faster than global copper production growth. The future market needs to focus on the first quarter of the mining enterprise report, smelting project investment and construction, as well as the progress of labor negotiations.