Recently, due to the rapid rise in commodity prices, attracted a great deal of national attention, regulators stepped in urgently to strengthen regulation, while superimposed market concerns about the Fed's monetary contraction, copper prices began to wobble downwards. On June 16, the news of the country's selling of copper reserves landed, and on June 17, the Federal Reserve raised economic and inflation expectations, triggering a rapid decline in copper prices, which returned to the April price range and entered an adjustment period.
The processing fee of imported copper concentrate continues to warm up.
The overall output of domestic copper concentrate is stable.
In the first half of this year, the processing fee for imported copper concentrate (TC) began to pick up continuously after falling to the low point of the year in April. On the one hand, it was caused by the centralized overhaul period of domestic smelters, on the other hand, it also showed that the tight supply situation in the copper market had been alleviated, but the absolute level of TC was not high.
From January to May, the cumulative import of copper concentrate reached 9.827 million tons, an increase of 6.04% over the same period last year. In May, the import of copper concentrate reached 1.945 million tons, up 1.25% from the previous month. Although copper concentrate imports improved in May compared with April, there are still several disturbing factors on the supply side. First, the Chilean government wants to raise taxes on mining companies to increase taxes, and the proposal is still under debate. A sharp increase in tax rates would curb future investment and production in Chile, harm copper output and raise supply concerns. Although the Chilean Senate suspended consideration of the copper tax increase on June 17, it still needs continuous attention. Second, Chile's Escondida and Spence mine remote operators union strike continues to ferment, the current Spence miners adjustment negotiations have been reached. As a result, Chilean copper production fell 1.5 per cent in April from a year earlier. Third, in the Peruvian presidential election, the leftist Castillo took the lead in the number of votes, and he once advocated nationalization of minerals and tax reform, which will bring risks to Peruvian copper production in the future. From January to April this year, Peru's copper production increased by 10% compared with the same period last year. The increase in global mining theory is expected to be around 700000 tons, of which Kamoa-Kakoula of the Democratic Republic of the Congo (DRC) is highly concerned by the market. On May 26th, the concentrator of 3.8 million tons of ore was officially put into operation in the first sequence of the first phase of the Kamoa-Kakoula copper project. As the largest new copper mine in 2021, the early commissioning of Kamoa-Kakoula will provide an important supplement to the supply of the market. According to the annual production plan, the Kamoa-Kakoula project is expected to produce 80-95000 tons of copper metal in copper concentrate in 2021. In the second half of the year, the production release cycle of the main new projects for copper concentrate, such as Grasberg, Spence, Mina Justa and Timok, will gradually begin, and it is expected that the global supply of copper concentrate will gradually improve in the future.
In April 2021, domestic copper concentrate production was 147800 tons, an increase of 5.4% over the same period last year. From January to April, the cumulative output of domestic refined copper was 577000 tons, an increase of 6.9% over the same period last year, which was higher than the level of the same period in 2019 and 2020, and showed a stable trend as a whole. At the same time, the domestic copper concentrate is expected to increase by 109000 tons in 2021, and the new production capacity will be further released.
Import demand for electrolytic copper is restrained
The import of scrap copper is on the rise.
In April, China produced 901200 tons of electrolytic copper, up 3.6 per cent from a month earlier and 10.1 per cent higher than a year earlier. From January to April, the cumulative output of electrolytic copper was 3.378 million tons, an increase of 15.3% over the same period last year.
In the first half of this year, driven by the rebound in processing fees, the smelting profit and loss balance was gradually restored. At the same time, sulfuric acid prices remain high, giving smelters profit margins, and the willingness to start smelting has been further strengthened. From January to April, the operating rate and daily output of the smelter gradually increased. In April, the operating rate of the smelter reached 96.8%, and the daily output increased by 21% compared with the same period last year. After May, affected by the centralized maintenance of smelting enterprises, the operating rate and daily output decreased compared with the same period last year. With the end of the overhaul of smelting enterprises, the output will pick up again in the second half of the year, which will bring some supply pressure.
In May, China imported 276700 tons of electrolytic copper, down 8.7 per cent from the previous month and 7 per cent from a year earlier. From January to May, imports totaled 1.4507 million tons, an increase of 0.7 percent over the same period last year, basically the same as last year, mainly for two reasons: first, the increase in the output of domestic smelters has reduced the dependence on imported electrolytic copper to a certain extent; second, domestic import losses have expanded, Yangshan copper premium has been falling, and import demand has been restrained. Electrolytic copper imports are expected to remain weak in the second half of the year.
In May, copper scrap imports were 139400 tons, down 16.9 per cent from the previous month and an increase of 100.7 per cent over the same period last year. From January to May, scrap copper imports totaled 670900 tons, an increase of 85.4 percent over the same period last year. Since the launch of the new domestic import rules for recycled copper in November 2020, the import of scrap copper has gradually increased. From January to May, the import of scrap copper increased by more than 85% compared with the same period last year. Although there is a cardinality effect, we can see the increasing trend of scrap copper import. However, due to the serious epidemic in Malaysia, which had an impact on the supply of scrap copper and domestic imports, scrap copper imports fell by more than 15% in May compared with the previous month. Malaysia imposed the first phase of the full blockade in the first half of June, which could disturb the supply of scrap copper and domestic imports in the near future.
From January to May, the price difference of fine waste copper was basically above 2000 yuan / ton, which was narrowed due to the recent decline in copper price. The monthly operating rate of scrap copper rod remains high during the period of centralized maintenance in copper smelter.
Generally speaking, with the continued implementation of the new regulations on copper scrap in the second half of the year, it is expected that the import of scrap copper will increase, but we should pay attention to the impact of the epidemic on the supply side of Southeast Asia, and pay attention to the change of the price difference of copper scrap.
Copper exports will be under pressure in the second half of the year
Copper imports in May were 47800 tonnes, down 6 per cent from a month earlier and up 3.6 per cent from a year earlier. From January to May, imports were 245200 tons, an increase of 10.8 percent over the same period last year. In May, copper exports totaled 53800 tons, up 2.6 percent from the previous month and 39.4 percent over the same period last year. From January to May, the cumulative export volume was 264200 tons, an increase of 18.1% over the same period last year.
According to the data, from January to May, due to the influence of the third wave of overseas epidemic, the growth rate of copper imports decreased and exports increased. At the same time, due to the increase in overseas production, the superimposed sea freight continues to rise, imports may recover in the future, and exports will be under pressure to a certain extent.
From the point of view of the primary processing end of copper, the average operating rate of copper is slightly higher than that of last year, but the industry differentiation is larger, the performance of copper rod, wire and cable is relatively weak, and the copper tube, copper plate, strip and foil plate is relatively good.
Affected by poor electricity consumption and high copper prices, the operating rate of copper pole and wire and cable enterprises continues to be poor, which is lower than the level of the same period from 2019 to 2020. In terms of copper tubes, during the peak production season of the air-conditioning industry from January to April, the overall operating rate maintained the 2019 level, but due to the decline in the growth rate of the air-conditioning industry and the impending off-season of production, the operating rate in May and June has shown a downward trend. Copper plate, strip and foil, according to SMM research, due to the downstream computer, automotive, semiconductor packaging and other industries orders have increased compared with previous years, the industry is in a high boom, the operating rate is higher than the same level in 2019 and 2020.
Differentiation of terminal consumer demand
In April this year, the total investment in the country's Electroweb project reached 85.2 billion yuan, an increase of 27.2 percent over the same period last year. The total investment in the national Electroweb power supply project reached 111.6 billion yuan, an increase of 23.8% over the same period last year. According to the data, in the first half of the year, the growth rate of domestic Electroweb investment slowed down, mainly due to the base figure.
According to the national Electroweb investment plan for 2021, the planned investment is 473 billion yuan, an increase of 12.5 billion yuan, or 2.7 percent, over the actual investment in 2020. As the first year of the 14th five-year Plan, it will support the overall electricity consumption expectation. On the other hand, the high copper price suppresses the overall demand, and the operating rate of wire and cable enterprises is not good. With the correction of copper prices, this situation will improve.
In addition to the traditional field of power generation, the consumption demand of copper in new energy power generation is also worthy of attention. According to the data released by the International Renewable Energy Agency ((IRENA)), the world's installed capacity of renewable energy has increased by more than 260GW in 2020, an increase of nearly 50% compared with the growth in 2019, mainly solar and wind power. With the rapid increase of the total installed capacity of power generation, the demand for copper will be greatly increased. According to our previous estimates, the demand for copper in photovoltaic and wind power generation will increase by more than 500000 tons in 2021, and will continue to rise in the future.
From January to April this year, the total output of household air conditioners was 55.78 million, an increase of 33.5% over the same period last year, and the growth rate showed a downward trend. The inventory of air conditioners was 21.09 million units in April, an increase of 1.58 million units over the beginning of the year.
At present, the operating rate of copper pipe enterprises has declined, after June will enter the off-season of air-conditioning production, output will be affected.
From January to April this year, the total output of refrigerators was 29.45 million, an increase of 40.9 percent over the same period last year, and the total output of washing machines was 29.17 million, an increase of 44.8 percent over the same period last year.
In May, car production was 2.04 million, down 9 per cent from the previous month and 7 per cent from January to May, with a cumulative output of 10.63 million vehicles, an increase of 37 per cent over the same period last year. From January to May, a total of 10.88 million vehicles were sold, an increase of 36.6% over the same period last year.
On the whole, the performance of domestic automobile production and marketing in the first half of the year is OK, but recently, some enterprises have reduced production and stopped production due to the supply of automotive chips, which may have a certain impact on later production and marketing. But on the whole, the automobile industry is currently in a period of recovery and will maintain its recovery trend in the future.
With regard to the demand for copper in the automotive industry, we need to focus on the field of new energy vehicles. According to the Development Plan of New Energy vehicle Industry (2021-2035) issued by the State Council in 2020, it is proposed that the proportion of new energy vehicles will reach 25% by 2025. The development of new energy vehicles will greatly drive the increase of copper demand. According to our previous estimates, the demand for copper from new energy vehicles and their charging piles, wires and cables will increase by about 130000 tons in 2021, and will continue to rise in the future.
In the first half of this year, the macro data of real estate maintained a high boom, and various indicators showed a high year-on-year growth, but the growth rate showed a downward trend. From January to May this year, the building construction area was 8.399 billion square meters, an increase of 10.1% over the same period last year. The new housing construction area was 743 million square meters, an increase of 6.9 percent. The completed area of the house was 276 million square meters, an increase of 16.4%. From January to May this year, the sales area of commercial housing was 664 million square meters, an increase of 36.3 percent over the same period last year, and sales of commercial housing totaled 7.05 trillion yuan, an increase of 52.4 percent. It can be seen that the good performance of real estate sales in the first half of the year was mainly due to the increase in residents' passive savings to some extent during the epidemic and normalization prevention and control, as well as the inflation and asset inflation expectations driven by global monetary policy easing.
In the second half of the year, under the influence of the "three red lines policy" in 2020 and the "centralized land supply" policy issued in 2021, it will disturb the rhythm of real estate enterprises to acquire land, and will have an impact on housing construction and completed area. On the other hand, according to market information, banks in Hangzhou, Huizhou, Wuhan, Hefei and other places have announced the suspension of second-hand housing loans, with the liquidity of second-hand housing market locked, will have an impact on the overall real estate sales. Future real estate sales may no longer be optimistic.
Considering such factors as the overall rise in inflation, the long-term pull of new energy demand, and the continued low absolute global inventory, the author believes that the long-term copper price will continue to rise. However, during the year, with the continuous fermentation of Fed policy expectations and the approaching off-season of consumption in the third quarter, a series of factors such as government savings gradually play an impact. 70,000 to 80,000 yuan per ton is the basic judgment of the high area of copper prices this year. Thanks to the fact that global inventories are still historically low, overseas consumption may gradually recover, domestic real estate infrastructure is still supporting the bottom, and copper prices are not very pessimistic at present, which is a volatile rather than unilateral market this year.
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