At the 16th China International Copper Industry chain Summit jointly held by Jiangxi Copper Co., Ltd., Shanghai Futures Exchange and SMM, Ye Jianhua, director of SMM, introduced the direction and future trend of copper price under the linkage of macro and fundamental aspects. SMM believes that tight copper concentrates have a limited impact on refined copper supplies, and that global copper production growth is optimistically expected to climb to 7 per cent in 2021 as new expansion comes into operation and superimposed overseas supplies recover from the epidemic. China's electrolytic copper production is expected to increase by 310000 tons to 9.61 million tons in 2021, an increase of 3.3 per cent and 2.4 per cent globally. In recent years, China's refining capacity has expanded faster than crude refining, so it is necessary to guard against the interference of environmental protection and carbon emission requirements on smelting projects and in-production capacity. The recovery in global manufacturing has given a boost to the rise in copper prices. 2021 as the first year of the 14th five-year Plan, the country and various regions actively promote carbon peak and carbon neutralization, bringing about the rapid growth of copper consumption in the field of new energy. Taken together, the gradual repair of the global economy and abundant global liquidity have contributed to the improvement of market confidence. In order to better promote the copper price, the fundamental quarter-on-month improvement is better than expected and the macro-level continuous resonance is better.
SMM believes that tight copper concentrates have a limited impact on refined copper supplies, and that global copper production growth is optimistically expected to climb to 7 per cent in 2021 as new expansion comes into operation and superimposed overseas supplies recover from the epidemic. China's electrolytic copper production is expected to increase by 310000 tons to 9.61 million tons in 2021, an increase of 3.3 per cent and 2.4 per cent globally. In recent years, China's refining capacity has expanded faster than crude refining, so it is necessary to guard against the interference of environmental protection and carbon emission requirements on smelting projects and in-production capacity. 2021 as the first year of the 14th five-year Plan, the country and various regions actively promote carbon peak and carbon neutralization, which also brings the rapid growth of copper consumption in the field of new energy. Taken together, the gradual repair of the global economy and abundant global liquidity have contributed to the improvement of market confidence. In order to better promote the copper price, the fundamental quarter-on-month improvement is better than expected and the macro-level continuous resonance is better.
Macroscopic
The overall development of the epidemic is improving, the global manufacturing data are recovering, and the global liquidity is loose.
With the release of the manufacturing PMI index in March, the global manufacturing index recovered. At present, US economic data continue to improve, with the US ISM manufacturing PMI rising to 64.7 in March, the highest level since 1983. The unemployment rate fell back to 6% in March, and the US job market is slowly moving towards a full recovery. China's manufacturing PMI was 51.9% in March, up 1.3% from the previous month, and the manufacturing sector rebounded. The final manufacturing PMI in the eurozone was 62.5 in March, higher than the initial reading of 62.4 and the final reading of 57.9 in February, and the highest since the survey was launched in June 1997. The recovery in global manufacturing has given a boost to the rise in copper prices.
The dollar index is negatively correlated with copper prices. As measured by the appreciation of the US dollar, the absolute price of copper fell in terms of constant value (relative concept), while the depreciation of the US currency suppressed both purchase demand and demand. The appreciation of the US dollar has increased the willingness to produce in non-US copper regions, as copper is denominated in US dollars, the US dollar appreciates and production costs are reduced. Most of the copper-producing areas are in South America, Southeast Asia and other regions. In the context of the economic recovery led by the United States, the dollar index is still in the upward channel and will continue to put pressure on high copper prices.
Biden came to power to implement a new round of bailout bills, 1.9 trillion of fiscal stimulus fell to the ground, and inflation expectations strengthened further.
The follow-up new infrastructure plan in the United States became the latest bait in the hands of bulls, with President Joe Biden officially unveiling a more than $2 trillion infrastructure and economic stimulus package aimed at optimizing the development of infrastructure, manufacturing and the Internet in the United States. But this is an eight-year long-term plan, and the market expects that Biden's infrastructure plan still needs to be approved in the form of "budget adjustment," which may be launched as early as September-October this year and implemented in 2022, not to mention that there are strong opposition from Republicans in the market. Biden's plan is more like a story hanging in the sky at present, and when it really hits the ground will be the focus of the market in the later stage. The $1.9 trillion bill focuses on individual subsidies and expands the scope of subsidies to boost demand expectations. In addition, U. S. investment in real estate and the stock market is still the first choice, the rise in real estate boosted consumption, real estate sales data rose significantly.
Mine end
The shortage of copper concentrate has limited influence on the supply of refined copper.
Although copper production has declined over the past year as a result of a series of events such as outbreaks, waves and strikes, SMM believes that the shortage of copper concentrates has had a limited impact on refined copper supply, and that global copper production growth is optimistically expected to climb to 7 per cent in 2021 as new expansion comes into operation and superimposed overseas supplies recover from the epidemic. Among them, the increment of the newly expanded copper mine in 2021 is the main driver of growth, and the increment of nearly 2 to 3 will be released after the middle of the year. According to SMM research, new large-scale copper projects have been put into production one after another, and the output of copper concentrate will increase steadily from 2021 to 2023.
According to SMM research, the current spot copper concentrate turnover still reflects a tight balance pattern, long Association TC in 2021 at 59.50 US dollars. The continuous shortage of copper concentrate supply has led to the decline of TC/RC, which is difficult to recover below 40, and the pressure at the smelter is increasing day by day. According to people familiar with the matter, TC prices in recent tenders are all less than $20 a tonne. Traders are accepting even lower prices to ensure supply. Since the second half of 2019, the break-even index of spot smelting of copper concentrate in SMM smelter has been in a state of loss and gradually expanded, with a loss of 1223 yuan / ton in January 2021. The pressure on the smelter is also increasing. However, the rising crude copper processing fees and sulfuric acid prices largely give "momentum" to the smelter, making up for the losses caused by the decline in copper concentrate and relieving some of the pressure on the smelter.
Refined copper
SMM survey shows that smelter maintenance in 2021 concentrated in the second quarter, abundant anode copper reduced refined copper. SMM expects China's electrolytic copper production to increase by 310000 tons to 9.61 million tons in 2021, an increase of 3.3 per cent and 2.4 per cent globally. In recent years, China's refining capacity has expanded faster than crude refining, so it is necessary to guard against the interference of environmental protection and carbon emission requirements on smelting projects and in-production capacity.
China's copper imports decreased in the first quarter of 2021, and since the beginning of January, there has been a sharp increase in winds and waves in the ports of northern Chile, resulting in a large-scale postponement of copper exports in January. In northern Chile, there are a number of large and medium-sized ports responsible for the transport of electrolytic copper and copper concentrate, such as Antofagasta, Mejillones, Iquique, Arica, Patache. At present, in addition to the normal operation of Antofagasta port, the other four ports are difficult to achieve large ships landing for electrolytic copper loading operation. In addition to shipping problems in South America, it also reflects weak domestic consumption to some extent, while imports of electrolytic copper this year will fall sharply from last year's all-time high of 4.52 million tons.
Consumption
Infrastructure projects VS consumer goods industry
The importance of scrap copper in the balance of electrolytic copper is self-evident. The increase of copper price is beneficial to increase the supply of scrap copper and restrain the consumption of refined copper. Since the middle of 2020, the advantage of scrap copper rod is better than that of refined copper rod most of the time, and it is even better in 2021, which suppresses the consumption of refined copper.
In the fourth quarter of 2020, from the operating rate of SMM refined copper rod, strip and foil, tube and rod, the overall operating rate showed a warped tail, but it was mainly supported in the field of export orders, and the performance of electrolytic copper rod was poor in 2021.
The low delivery volume of the copper network leads to the weakening of cable consumption, and the investment in Electroweb projects will drop by 6.2% in 2020.
At the beginning of 2020, the country raised the investment in the Electroweb Initiative from 400 billion yuan to 460 billion yuan, sending a positive signal that the country is promoting an infrastructure underpinning economy.
The concentration of delivery volume of the national network in the second quarter of 2020 promoted the rapid improvement of electricity consumption, which was an important reason for the better-than-expected performance of copper consumption since April, as well as a drag on copper consumption in the second half of the year. Electroweb still shows weakness in promoting copper consumption. According to SMM, the infrastructure end of Electroweb has moved backward again, and there is no obvious sign of placing orders.
Terminal consumption rebounded month-on-month in the second half of 2020, and the performance of white electricity and cars exceeded expectations until the middle of the second quarter of 2021. As a result of the epidemic, consumption in the real estate and air-conditioning industries fell to an all-time low, and consumption rebounded strongly in the second quarter. After 2000, the real estate and air-conditioning industries began to heat up rapidly, and consumption recovered rapidly. Cable consumption was seriously lower than expected in the third quarter of 2020, dragging down copper consumption, but export orders supported copper consumption strongly in the fourth quarter.
New energy vehicles have a good momentum of development, which has also played a role in promoting copper consumption. Countries around the world are actively promoting the development of new energy vehicles. Under the strong promotion of the government, China has become the world's largest market for electric vehicles, with a global market share of more than 50% in 2020. In Europe, government promotion varies from country to country; these policies include strict emission regulations, direct consumer subsidies and the improvement of infrastructure to promote the development of electric vehicles. The United States promotes the innovation hub of electric vehicles, and Tesla has become the leader of the global electric vehicle market.
2021 as the first year of the 14th five-year Plan, the country and various regions actively promote carbon peak and carbon neutralization, which also brings the rapid growth of copper consumption in the field of new energy. It is estimated that from 2020 to 2025, the amount of copper used in the domestic photovoltaic sector will increase by 21%, that in the domestic wind power sector will increase by 16%, and that the domestic copper consumption of power cells and charging piles will increase by 38%.
SMM believes that the gradual repair of the global economy and abundant global liquidity have contributed to the improvement of market confidence. In order to better promote copper prices, LME copper prices are expected to run at 7600-9500 US dollars / ton in 2021 and 57000-70000 yuan / ton domestically, regardless of the background of global large-scale re-outbreak of the epidemic. The middle of the year will be a key point of relative game inflection point.
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