At the 2024 SMM (Third) NEV Supply Chain Expo and Drive System Three-Electricity Technology Forum hosted by Shanghai Metals Market (SMM), SMM Industry Research Department GM Ye Jianhua analyzed the 2024 copper and aluminum prices and market.
Copper Prices Break Historical Highs
Macro Perspective
Global major economies' manufacturing PMI indicates global economic recovery.
The downward pressure on the US economy appears limited.
The US is at the end of its monetary tightening cycle, with the economy showing resilience, not triggering market concerns about a recession. The US April CPI fell to 3.4%, and the core CPI fell to 3.6%. Recent employment market data shows cooling, stimulating market expectations for rate cuts, which is favorable for copper prices. However, the consumer confidence index in May plummeted, indicating some market concerns about the US falling into stagflation.
In April, China's manufacturing PMI and new export orders index remained in expansion territory, and CPI exceeded expectations.
China's manufacturing PMI in April slightly dropped by 0.4 percentage points to 50.4% but remained in expansion territory.
In April, consumer demand continued to recover, with China's CPI exceeding expectations, turning from a decline to an increase MoM. PPI fell MoM but the decline narrowed YoY, with industrial production continuing to recover, expected to turn positive around mid-year.
The new export orders index in April was 50.6%, also in expansion territory.
Capital Markets Go Crazy for Copper
Recently, copper prices have shown a significant upward trend. Influenced by expectations of copper ore supply shortages, COMEX copper short squeezes, and capital market enthusiasm, copper prices hit a historical high last week.
Fundamentals
China's smelters' spot TCs for copper concentrate turned negative, RCs remained low, and the profitability of purchasing spot copper concentrate for smelting deteriorated significantly, increasing the risk of reduced production rates at Chinese smelters.
The main global copper concentrate increments come from expansion projects.
The concentrated launch of global smelting capacity exacerbates the tight copper concentrate supply. In H2 2024, smelters may face raw material shortages.
The tight copper concentrate cycle arrives early.
The long-term contract TC in 2023 was $88/mt, and that in 2024 is $80/mt.
Due to the unexpected accumulation of copper cathode inventory in China, SHFE near-month contract maintains a contango structure, and spot prices maintained discounts.
Aluminum Cost Curve: In April, the cost of refined aluminium increased by 78 yuan/mt MoM, and the cost in May may exceed 17,000 yuan/mt.
According to SMM data, the average full cost of China's refined aluminium industry, including tax, in April 2024 was 16,539 yuan/mt, up 0.48% MoM and 3.55% YoY. Although the cost of refined aluminium increased MoM in April, the industry's profitability increased significantly MoM, mainly due to the substantial rise in aluminum prices. In April 2024, the average spot price of SMM A00 was about 20,236 yuan/mt, and the average profitability of the domestic refined aluminium industry was about 3,697 yuan/mt, up 35.12% MoM and 35.16% YoY.
Alumina Cost: According to SMM data, in April 2024 (March 26-April 25), the national average price of alumina was 3,307 yuan/mt, down 24 yuan/mt from March. Regionally, the monthly average price of alumina in Shanxi and Henan decreased significantly, while the monthly average price in Guangxi and Guizhou remained stable overall, and the monthly average price in Shandong increased. In April, Shandong's alumina output accounted for a higher proportion of the national total than Shanxi and Henan, and due to updates in unit consumption, the alumina cost for producing one ton of refined aluminium accounted for 39.50% of the full cost of refined aluminium.
Other Auxiliary Material Costs: In April, the prices of aluminum fluoride and other auxiliary materials increased, with some costs rising by 10.5% MoM. Due to the increase in electricity prices in some regions and updates in the comprehensive AC power consumption of aluminum liquid, the power cost of refined aluminium increased slightly. Other costs remained largely stable.
Cost Forecast: Entering May 2024, alumina prices rose rapidly. As of May 10, the national average price of alumina was 3,678 yuan/mt. SMM expects the domestic alumina tight balance pattern to continue, with spot prices likely to hover around the current level in the short term. Therefore, the national average monthly price of alumina in May is expected to increase significantly, and the alumina cost for refined aluminium may increase significantly. In terms of electricity, recent thermal coal prices have risen, and electricity prices in May may remain stable with a slight increase. SMM expects the average full cost of the domestic refined aluminium industry, including tax, in May to be around 17,000-17,300 yuan/mt.
Supply Side: Domestic Capacity Reaches "Ceiling," Industry Operating Rate Increases Year by Year
► Operating rate at high levels, capacity reaches "ceiling," future supply growth to slow
From 2013 to 2015, domestic refined aluminium capacity was in surplus, the industry suffered losses, and the operating rate was low.
In 2016-2017, the Development and Reform Commission and other four ministries issued Document No. 656 in April—"Action Plan for Cleaning Up and Rectifying Illegal and Non-compliant Projects in the Refined aluminium Industry," leading to the exit of non-compliant capacity.
From 2018 to 2020, with the gradual advancement of domestic refined aluminium capacity replacement projects, capacity gradually recovered to around 43.2 million mt.
In 2024, domestic refined aluminium capacity is expected to reach 45.57 million mt, with an annual operating rate of around 94%.
► Seasonal power supply shortages in Yunnan drag down the operating rate of the refined aluminium industry with existing capacity
As of the end of April 2024, domestic refined aluminium capacity reached 45.19 million mt, with an operating capacity of 42.62 million mt;
Among them, 1.07 million mt of capacity is in a state of resumption, mainly distributed in Yunnan, Guizhou, and Sichuan.
There are 540,000 mt of idle capacity, which is difficult to start due to various reasons.
Qinghai Haiyuan and Guangyuan Qimingxing have a total of 240,000 mt of capacity under construction for upgrades.
Unclear capacity refers to capacity that has been built but lacks clear indicators from enterprises, making it impossible to start, totaling around 320,000 mt.
Aluminum Inventory Analysis: Recently, the proportion of aluminum liquid is high, and ingot production is low.
SMM believes that the domestic aluminum ingot inventory after the Labour Day holiday performed better than pre-holiday expectations, mainly due to low ingot production in April, relaxed upstream aluminum plant inventory pressure, and a slowdown in shipment pace.
SMM expects domestic aluminum ingot inventory to remain below 800,000 mt in May, maintaining a stable to slightly declining trend.
Performance of Major Copper End-Users in 2023 and Expected Performance in 2024
Real Estate Poses Long-term Pressure on Copper Consumption, Dragging Down Home Appliances and Traditional Power Industries
From the perspective of the real estate market's transaction end, actual consumption remains weak, with high copper consumption in the downstream real estate chain, posing long-term pressure. In the short term, construction is resuming nationwide, but from various copper consumption, post-holiday real estate new orders remain weak, negatively impacting copper consumption.
Air Conditioner Production Growth Slows
Air conditioner companies' inventory is increasing, with domestic sales performance not ideal, and production mainly supported by export orders. Rising raw material prices are increasing pressure on dealers, and demand may start to slow in May.
Significant copper price increases force most manufacturers to passively accept high raw material costs, accelerating the implementation of "aluminium as a substitute for copper" in air conditioning copper tubes and lightweighting. Meanwhile, leading companies may accelerate the implementation of "aluminium as a substitute for copper."
Notably, domestic sales channels are currently stocking up aggressively, driven by consumption expectations from weather and old-for-new policies. While overall export demand is expected to rebound, the Red Sea crisis has already boosted demand previously. Domestic real estate sales data remains sluggish, and expected to drag down the home appliance industry in the medium and long term, with annual home appliance copper consumption remaining pessimistic.
Power System - From January to April 2024, grid investment increased by 24.9% YoY, and power source investment increased by 5.2%.
From 2023 to 2027E, the new energy industry chain, from power generation to transmission to consumption, is expected to drive an average annual growth of 1.5% in global copper consumption.
The new energy sector is the main engine driving future copper consumption growth, but caution is needed for lower-than-expected unit consumption and growth rates.
Aluminum End-User Demand: In 2024, Aluminum Consumption in Power and Electronics May Exceed Construction
In aluminum end-user consumption, construction, transportation, and electronics account for nearly 70% of total consumption. In 2022, domestic construction aluminum consumption declined significantly YoY due to weak real estate, but with the implementation of strong policies such as ensuring housing delivery in 2023, domestic construction aluminum consumption was expected to grow by 1.5% YoY. However, due to a significant decline in new real estate area, construction aluminum consumption is expected to have no growth prospects in the coming years.
In 2023, domestic total demand was expected to grow by 5.1% YoY, with the power industry adding over 1.3 million mt of aluminum consumption, mainly from the photovoltaic sector. The transportation and automotive industry used nearly 550,000 mt of aluminium, and durable goods and packaging used about 400,000 mt of aluminium.
2024 will see domestic aluminum consumption continue to tilt towards the new energy sector, with global photovoltaic installations and NEV penetration rates increasing annually, driving aluminum applications in transportation and power to grow YoY.
Global Copper Cathode Supply and Demand Balance: In the medium and long term, the issue of copper supply shortages is unavoidable.
Aluminum Supply and Demand Balance: Domestic refined aluminium output is expected to grow by 3.1% in 2024, with net imports remaining high, adding supply pressure.
In April 2024, due to continued power release in Yunnan, some companies completed the first batch of resumption and continued to increase capacity. SMM expects domestic refined aluminium operating capacity to break through 43 million mt by the end of Q2, with Q2 output reaching 10.685 million mt. Additionally, overseas restrictions on Russian aluminium metal circulation are increasing, and domestic Russian aluminium metal imports are expected to remain high in 2024. Currently, the import window is closed, with import sources mainly long-term contracts. Q2 net imports are expected to grow by 77% YoY to about 390,000 mt, adding some supply pressure domestically.
In 2024, SMM expects Yunnan to resume production in batches starting from Q2, along with new production from Inner Mongolia Huayun Phase III and the resumption of Guizhou Anshun Aluminum. SMM expects annual output to grow by 3.1% YoY to about 42.82 million mt, with annual net imports reaching about 1.742 million mt. Construction aluminum consumption is expected to have no growth, while photovoltaic and new energy growth will slow, leading to a slowdown in domestic consumption growth. In 2024, domestic refined aluminium is expected to show a slight surplus. Overseas supply growth is 2.0%, with increments from regions such as Indonesia and Brazil, maintaining a tight balance in the global refined aluminium supply and demand.
The downside for copper and aluminum is expected to be limited.
![[ Análise SMM ] Um guia visual para os relatórios semestrais de 2026 de 19 fundições de cobre](https://imgqn.smm.cn/usercenter/gCNEi20251217171715.jpeg)
