Welcome to the SMM webinar series on the non-ferrous metals markets. Our analysts will share their insights on what’s trending in the Chinese domestic markets, providing in-depth analysis on the fundamentals that affects demand and supply.
What’s trending in the Chinese copper market?
In 2019, a higher disruption ratio of copper concentrate lowered treatment charges (TCs) of spot copper concentrate below cost lines at smelters. Smelters in China are facing greater pressure amid lower TCs combined with tight supply of blister copper and scrap. On the other hand, copper smelting capacity is growing rapidly in China. The mismatch of copper metal supply and demand will have a significant impact on the copper industry chain.
The growth in global copper concentrate output was under expectations in 2019 due to several industrial accidents. This, combined with the commissioning of new and expanded projects at Chinese smelters, lowered TCs of copper concentrate to around costs lines at smelters. A few projects at large copper mines are expected to go online in 2020. The transition period to underground mining operations at Grasberg and Chuiquicamata copper mines, and the rapid expansion of global smelting capacity are expected to further tighten copper concentrate supply. Will spot TCs in 2020 put a stop to the downward trend? How will TC benchmarks at $62/mt in 2020 affect smelters?
Chart 1: Spot Concentrate TCs
On the other hand, copper scrap imports declined significantly in the second half of the year 2019 due to the embargo on imports of Category 7 scrap in January and Category 6 scrap re-categorised as restrictive imports from July. This, together with difficulties for domestic large dismantling plants from strict environmental inspections, further tightened domestic copper scrap supply.
The policy of secondary copper resources is expected to take effect in Q2 2020, and can the policy ensure the supply of copper scrap in China in 2020?
Chart 2: Copper scrap imports
The State Grid issued the Notice Regarding Stricter Control on Power Grid Investment in order to raise investment efficiency and this triggered concerns over copper consumption by the electric sector. The planned investment on power grid networks in 2020 is expected to decline and level with the actual investment of 450 billion yuan in 2019, while construction activity will accelerate.
Will consumption in the power sector be robust in the last year of the 13th Five-Year Plan? Will consumption be affected by the Notice Regarding Stricter Control on Power Grid Investment?
Chart 3: Annual investment of State Grid
Export of household appliances has declined significantly since 2018 amid the US-China trade disputes. In addition, the economic downturn in Europe also put pressure on the export of household appliances. Domestic sales underperformed due to the downturn in real estate sales. In 2019, the sales area of commercial housing year-on-year is facing continued negative growth, which led to the poor performance of household appliances sales in China.
In 2020, the overseas market is expected to recover. Will the recovery of overseas market lead to more household appliances exports? Will high inventories affect the production of household appliances companies?
Chart 4: Conditioner and commercial housing sales
1. Will the release of smelting capacity drive shortages of the copper concentrates supply?
2. How will secondary copper resources policy impact copper scrap industry?
3. How will the power industry be impacted by the State Grid Investment in 2020?
4. How will the household appliance sector be with limited exports and high inventories in 2020?
Date/Time: Thursday, February 6 2020, 4:00 PM CST