Post-COVID-19 Copper Market: Between reality and expectation

SUZHOU, Dec 4 (SMM)—Copper prices are expected to move higher amid recovering global economy and ample market liquidity.

“China is highly dependent on copper raw materials import because of its huge copper consumption,” said Ye Jianhua, Director of SMM Big Data.

Ye was speaking on the 2021 outlook of China and global copper marketes to local and international delegates today at the Shanghai Metals Market's 2020 Nonferrous Metals Industry Chain Annual Conference held in Kempinski Hotel at Suzhou, China.

Source: SMM

Source: SMM

China’s copper consumption has accounted for about 50% of global copper consumption, but insufficient supply has prompted it to import large amounts of copper cathode from overseas market. Its net import of copper cathode increased by more than 1.2 million mt in 2020, registering a new record high.

China’s self-sufficiency of copper concentrate has declined from 40% in 2010 to 22% in 2019, and demand-supply imbalance has worsened. Therefore, it needs to import copper raw materials from overseas to meet domestic consumption.

“However, the COVID-19 pandemic has reduced global copper concentrate output by about 500,000 mt (Cu content). TCs/RCs hovered around 50 yuan/mt amid tight copper concentrate supply, and many smelters produced at losses. Given the current spot copper concentrate transaction and tight balance, we expect that the TC benchmark in 2021 is likely to stand at around $60/mt,” Ye said.

Source: SMM

As for copper scrap import, Ye explained that the new secondary (brass) copper import policy that took effect from November 1 is conducive to the recovery of copper scrap imports which shrank by nearly 500,000 mt in copper content from January to September due to the global pandemic and the adjustment of China’s solid waste import policy.

On the demand side, Ye said that copper consumption weakened in the second half of this year, and global visible inventories of copper cathode have increased by nearly 200,000 mt as of mid-to-late November compared with the end of last year

“The gradual recovery of global economy and ample liquidity in global markets will boost copper prices next year. We estimate that LME copper would move between $6,400-7,600/mt, while SHFE copper between 48,000-56,500 yuan/mt in 2021,” Ye concluded.