SHANGHAI, Jul 19 (SMM) - At the 17th SMM China Copper Summit 2022 held by SMM, Liu Qunyi, director of the Basic Mineral Strategy Research Office of the China Geological Survey (Chinese Academy of Geological Sciences) and the Global Mineral Resources Strategy Research Center, gave a thorough analysis on the supply and demand balance of copper resources in the world and China in the mid and long run. He believes that in the future, the domestic supply of copper will still be seriously insufficient, and copper has thus become one of the minerals with the greatest dependence on imports and the most severe supply dilemma in China. In the next 5-10 years, the domestic copper supply shortage will be maintained at around 8-10 million mt. In the next 15 years, with the increase in recycled resources and changes in copper demand, the dependence on imports will continue to decline from the current 71.1% to 53.2% by 2035. Since copper is regarded as a financial facility, the price will stay high for a long time.

I. Global and Chinese copper demand dynamics

Global copper consumption

In the 21st century, China has long been the world's largest copper (refined copper) consuming power. In 2021, China's copper consumption accounted for 55% of the world's total.

Since 1900, the global refined copper consumption and GDP growth has close and positive correlation. It has been proved in developed countries that slowing GDP growth corresponds with slowing copper demand expansion. It is expected that in the next 15 years, China's GDP growth rate will show a downward trend, and the copper consumption will also expand more slowly.

With the continuous growth of per capita GDP, per capita copper consumption has shown an "S"-shaped trajectory, which rises quickly at first and then gradually stabilises after peaking at some point. The per capita copper consumption at the apex differs by economy, which is closely related to the economic development mode and structure, industrialisation course and other factors.

Correlation analysis between per capita copper consumption growth and per capita GDP shows that there are three important transition points: the take-off point, the turning point, and the zero growth point.

At the take-off point, the demand for copper in the processing manufacturing, construction and other industries begins to grow rapidly.

At the turning point, the tertiary industry begins to steer the economic development, and the growth rate of the secondary industry slows down, with urbanisation and industrialisation course gradually stagnates. And the demand for copper by power facilities tends to be saturated. However, the demand for copper in the construction industry, transportation, high-end machinery and instrument manufacturing industries is still growing steadily.

At the zero growth point, industrialisation and urbanisation are basically completed, and the demand for copper in the construction industry, transportation, high-end machinery, and instrument manufacturing industries reaches a maximum.

With the deepening of the industrialisation process, the copper consumption intensity of all countries will show similar development track, which means that the copper consumption is likely to peak when the per capita GDP reaches 8,000-10,000 US dollars.

China copper demand forecast

The peak of China's copper demand is expected to come around 2025-2027, with a total demand of 15.5 million mt. The demand will be maintained at this level in the next 5-8 years after peaking.

Global copper consumption structure

Construction is the world's largest copper consumption sector, and in 2020, it accounted for 23% of the total global consumption.

U.S. copper consumption peaked around 2000, and construction has long been the largest consuming industry. Copper consumption in Japan's power industry tops all other industries, and the transportation industry has been growing in recent years. In China, power industry is standing copper consuming champion, and its development is determinant to copper demand. Consumer goods (home appliances) industry is the second largest copper consuming sector, paralleling electronic communication sector. The development of machinery manufacturing and transportation industry runs through the whole process of industrialisation, and the current growth rate is slowing down.

A large part of copper consumption has been substituted by other varieties, and the space for further substitution is limited. China's copper consumption has been the top in the world for a long time, but the proportion will slowly decline to about 44% by 2035.

II. Global and Chinese copper resources

According to USGS statistics, the global terrestrial proven copper resources currently total 2.1 billion mt. The main types of copper deposits in the world include porphyry, sand shale, volcanic massive sulphide (VMS), magmatic copper-nickel sulphide. The porphyry accounts for 56% of the total resources, mainly distributed in four metallogenic belts including the circum-pacific metallogenic belt and the Tethyan orogenic belt. In 2021, the global reserves stood at 870 million mt, and Chile ranked the first, accounting for 24%. China holds 26 million mt, accounting for 3% of the world, ranking sixth.

Distribution of copper resources in China

China has identified 2,520 mining zones with an explored reserve of 110 million mt. The copper resources in China feature small in scale and limitedness in amount. The average grade of China's main copper ore is 0.52%, and the average grade of associated copper ore is 0.16%. There are few bonanzas with grades above 1%.

Distribution of global copper resource potentials

There are 3.5 billion mt of undiscovered copper resources in the world, mainly distributed along the Andes Mountains. China has a total over more than 300 million mt of undiscovered copper resources, mainly distributed in the Qinghai-Tibet Plateau.

In 2021, the global mine output stood at 21.35 million mt, and the output growth rate has been low in recent years. Chile has long been the world's largest supplier of mineral copper, accounting for 26.3% of the world's total in 2021. China's output stood at 1.74 million mt, accounting for 8% of global output, much higher than its proportion of reserves.

In 2021, the global secondary copper output totalled 4.12 million mt. The difference between the output of refined copper and mineral copper comes from the secondary copper produced by scrap, which accounts for 18-21% of the refined copper output. China is the world's largest producer of refined copper, accounting for 56.8% of the world’s total in 2021.

Status quo of China copper entities going abroad

According to incomplete statistics, the accumulated equity investment in overseas copper mines by Chinese investors has exceeded $14 billion, and they have participated in the exploration, design and construction of more than 70 large-scale overseas copper mine projects located in the Congo (DRC), Zambia, Peru, Australia, Ecuador, Serbia, Kazakhstan and other regions. The equity resources engaged by Chinese mining-related projects are about 143 million mt.

Global secondary copper output as a percentage of refined copper production

The use of secondary copper resources in developed countries accounts for more than 50% of the total consumption. The proportion of secondary copper in global refined copper production has always been more than 10%, with an average proportion of 18%. As the recovery rate of secondary resources in China increases, the consumption hub of global secondary copper will also shift to Asia. China's recycling rate is lower than that in developed countries such as the United States, because copper industrial products are exported in large quantities.

III. Future supply and demand balance

In the future, the domestic supply of copper will still be seriously insufficient, and copper has thus become one of the minerals with the greatest dependence on imports and the most severe supply dilemma in China.

In the next 5-10 years, the domestic copper supply shortage will be maintained at around 8-10 million mt, In the next 15 years, with the increase in recycled resources and changes in copper demand, the dependence on imports will continue to decline from the current 71.1% to 53.2% by 2035. Since copper is regarded as a financial facility, the price will stay high for a long time.