[SMM Annual meeting] SMM:2019 year copper price center of gravity moves up copper mine growth rate slows down short-term stable long-term pressure

SMM, 19 Oct: Ye Jianhua, senior analyst of SMM copper, said at the "2018 China Nonferrous Metals Annual meeting and 2019 (SMM) Metal Price Forecast Conference" held by Shanghai Nonferrous Metals Network in Shanghai on October 19, 2018. The copper price road is blocked and long, but the trend has not changed, and the center of gravity of copper price operation is expected to remain upward in 2019.

Copper raw materials: copper mine growth slows in 2019 there are only a handful of large mines newly put into production overseas

Due to a sharp decline in global copper production in 2017 as a result of large-scale mine strikes and other factors, SMM expects copper supply growth to rise to 3.3 percent in 2018 from minus 1.0 percent in 2017. Copper supply growth is expected to slow again to about 2.4 per cent in 2019, with mineral copper increasing by about 500000 tons. The largest increment is the Cobre Panama mine owned by First Quantum, which is expected to be 150000 tons.

Spot copper concentrate TC/RC has been climbing since May, not as a result of increased copper concentrate production, but because of problems with some of the world's crude production capacity. Such as: India Vedanta's 400000 tons / year crude production capacity shut down, Philippines PASAR acid equipment failure, Yuguang gold lead oxygen equipment pipe collapse, Liaoning far East Copper smelting furnace water and so on.

Benefiting from the high level of copper concentrate TC/RC in previous years and the domestic demand for self-sufficiency at the end of electrolytic copper, China's smelting capacity has entered the peak period of production in the past two years. According to SMM statistics, the new global copper smelting expansion projects are basically concentrated in China.

China's copper smelter projects have been intensive in the past two years, and SMM expects more than 700000 tons of annual capacity to be delivered in 2019. China's electrolytic copper production is expected to be 8.75 million tons in 2018, an increase of 9.4 percent, and 9.5 million tons in 2019, an increase of 8.6 percent.

SMM expects that the global copper concentrate will be in short supply, the long single copper concentrate TC/RC will remain downward, and the centralized construction of copper smelter projects will also put pressure on TC/RC.

Copper scrap: China's import of scrap copper will be reduced under China's strict environmental protection policy

Because of the rising grade of imported scrap copper, the amount of metal is much less than the amount of material. The average copper grade of scrap copper imports was 37% in 2017 and about 56% in 2018.

Ban on the import of "scrap seven" scrap copper and stricter import examination and approval system, the reduction of scrap copper is difficult to rely on domestic scrap copper to make up for in the short term, if the "scrap six" is also banned in 2020, it will effectively increase the consumption of refined copper in a certain period of time. The supply of scrap copper shrank, making the advantage of scrap copper prices fade.

The expansion of capacity and the reduction of scrap copper in Chinese smelters have led to a gradual increase in the import of anode copper. The crude copper processing fee fell down as well as the copper concentrate TC/RC in a certain period of time.

The substitution of refined copper for scrap copper and domestic consumption boosted the amount of imported copper to pick up significantly.

As China's "demand" for refined copper increased, the overflow price of imported copper returned to its highest level in more than three years, creating great uncertainty for the 2019 long order negotiations.

Copper demand: short-term stabilization and long-term pressure

SMM expects China's copper consumption to enter a slow and slow growth range, with a compound growth rate of 3.4 per cent between 2018 and 2020.

Real estate: investment growth, stable economy, but severe situation in the medium to long term

Real estate is the largest gray rhinoceros in China's economy. The imbalance of economic structure and the rapid growth of debt are all hidden dangers in the future. A series of policies such as deleveraging are gradually getting rid of the dependence on the real estate economy and guard against its contusion to the real economy.

Real estate regulation will continue, it is expected that the national real estate growth rate will continue to decline in 2018, the future real estate situation is still grim.

In the 13th five-year Plan, the amount of investment in the power grid is 3.34 trillion. According to the completion rate of 80 to 85 percent over the years, the actual amount of investment is 2.67-2.84 trillion, which means that there is still a high amount of investment that can be released from 2019 to 2020.

Air conditioning: real estate pull slows down to boost demand for replacement

Automobile: low sales of traditional cars and rapid development of new energy vehicles

The vigorous development of new energy vehicles will lead to the growth of copper consumption. With the implementation of the double-point policy in 2019, the production and sales of new energy vehicles will maintain rapid growth. According to the 13th five-year Plan, by 2020, the output of new energy vehicles will reach 2 million. It is estimated that the amount of copper used will increase to about 100000 tons per year.

Prospect of Copper Price in 2019

Taken together, SMM expects the focus of copper prices to remain upward in 2019, with LME copper prices running at $5800 to $7600 / ton and SHFE copper prices at $47000 to 58000 yuan / ton.