Copper, as one of the bulk strategic materials, is an irreplaceable and important raw material in the national economy, having both commodity and financial attributes. China is the world's largest producer and consumer of copper semis. The application fields of copper semis continue to expand and the level of localisation continues to improve. The national 14th Five-Year Plan and high-quality development have put forward clear development directions and goals for copper-related industries. SMM analyses the future trend and main application fields of copper in China based on the current market supply and demand of copper in China and current policies.
China copper cathode supply analysis
China is the main producer of copper cathode and also the largest contributor to the global output of copper cathode. China’s copper cathode output in 2022 was 10.28 million mt, accounting for 42% of the global total. With the continuous development and progress of China's scientific and technological level, the copper cathode manufacturing technology has become more and more mature, helping output of copper cathode increase. In 2018, the output of copper cathode increased significantly from 8 million mt to 8.73 million mt, due mainly to China's copper smelting projects being put into production. After 2018, the growth rate stabilised and the average annual growth rate remained at 4.2%.
China's copper cathode supply 2017-2022 (unit: 10,000 mt)
With the gradual release of new copper cathode production capacity in China, it is expected that the output of copper cathode will show a year-by-year growth trend from 2023E to 2026E, but the growth rate will gradually slow down. On the supply side, scarce reserves of domestic copper resources has limited the growth of copper cathode production. According to the future expansion plans of copper enterprises, it is estimated that by 2026, the production capacity of copper cathode in China will reach 15.55 million mt, and the output will reach 12.43 million mt. Although the growth rate of copper cathode production in China is higher than that of consumption, the supply still falls short of demand, resulting in a high degree of dependence on imported products.
China's copper cathode supply development trend 2023E-2027E (unit: 10,000 mt)
China copper cathode supply analysis
The end-user demand for copper cathode is wide. According to SMM statistics, the total end-user demand for copper cathode in China was 14.56 million mt in 2022. Copper demand in the power industry accounted for 46%, and home appliances accounted for about 14% of copper consumption. Transportation accounted for about 12%. The construction and electronics industries accounted for 8% and 9% respectively.
The demand from the power industry will be the core driving factor for the growth of copper consumption in the future. With the implementation of the dual-carbon policy goal, new infrastructure and clean energy may become new bright spots in the increase in domestic demand for copper cathode. The power structure will transit to clean and low-carbon, and the pace of power investment will continue to accelerate in the future. Wind power and photovoltaic power generation will contribute to most of the new power installations.
For the construction sector, it is estimated that China's urbanisation rate will reach 65.5% by 2025, according to China's Rural Development Report issued by the Chinese Academy of Social Sciences. And the rate will reach 70% by 2030, according to State Council National Population Development Plan (2016-2030). Considering that China's urbanisation rate has reached 63.89% in 2020 (0.49 percentage point higher compared to the planned 63.4%), and average copper consumption of 0.28 kg in per m2 construction (according to the Ministry of Land and Resources Future Demand for Copper Downstream Industries), it is estimated that by 2026, the amount of copper used in the construction industry will reach at least 1.2 million mt, with an average annual growth rate of 1.1% in copper consumption.
In the transportation sector, according to China's New Energy Vehicle Industry Development Plan (2021-2035), the penetration rate of new energy vehicles in China will reach 20% in 2025, and the amount of copper used in new energy vehicles will increase. New energy vehicle motors, batteries and charging functions all require a large amount of copper. The automotive electronics driven by new energy vehicles will also increase the use of copper. SMM expects that the amount of copper used in the transportation sector will stand at 2.45 million mt in 2026 with supportive policies. The copper demand is promising on the back of support from new energy vehicles.
In the home appliance industry, the copper consumption of air conditioners accounts for about 80%. In the future, as the production and sales scale of the air conditioner industry is affected by the implementation of the New Energy Efficiency Policy and the full completion of the goals stipulated in the Montreal Protocol, it is expected to enter a new period of expansion. It is estimated that the output of air conditioners from 2023 to 2026 may grow at an average annual rate of about 6%, that is, the demand for copper in the air conditioner industry may reach 1.688 million mt by 2026. The overall copper consumption by household appliances may reach 2.11 million mt.
In the mechanical sector, as the COVID-19 pandemic situation continues to improve, the demand for consumer electronics products will return to normal. The demand for copper in 5G communications industry and new energy automotive electronics will maintain a healthy growth. It is estimated that by 2026, the copper consumption of domestic electronics industry will reach 1.47 million mt, a year-on-year growth rate of 2%.
China's copper cathode end-user demand trend 2023-2026E (unit: 10,000 mt)
SMM is an information provider in China's professional non-ferrous consulting field. The consulting products mainly include industry supply and demand price analysis, supply chain management analysis, market research, on-site research, professional research reports, customized research reports, industrial planning books, industry white papers, etc. The reports can be updated quarterly, semi-annually, or annually according to the need of clients.
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Nonferrous Consulting Manager Deng Chenyang (17789717229)