1、 Trend analysis
According to data from Shengyi Society, copper prices will experience wide fluctuations throughout 2025. The highest point for copper prices in 2024 was 87121.67 yuan/ton on May 20th, and the lowest point was 67996.67 yuan/ton on January 17th, with a maximum amplitude of 28.12%.
2、 Market Review
The annual trend of copper prices can be divided into five stages:
Phase 1 (January March): No significant driving force, copper prices continue to fluctuate and consolidate in a narrow range as in the previous period;
Phase 2 (mid March to the end of May): Macro fund allocation, supply side driven, copper prices hit a historic high;
Phase Three (late May to early August): Expectations of a Federal Reserve interest rate cut fell through, manufacturing PMI in China and the United States declined, high copper prices suppressed downstream demand, and prices rapidly declined;
Phase Four (August to early October): The Federal Reserve initiates interest rate cuts, domestic stimulus policies are frequent, copper demand improves during the Golden September and Silver October periods, and copper prices rebound slightly;
Phase 5 (October to the end of the year): Trump wins the election, the US dollar strengthens, suppresses copper prices, and slightly falls.
Supply side
Gamma-PGA (gamma polyglutamic acid) |
Domestic copper production capacity and output from 2011 to 2024
According to data, China’s refined copper production in November was 1.133 million tons, a year-on-year decrease of 1.6%. The cumulative production of refined copper (electrolytic copper) from January to November reached 12.451 million tons, a year-on-year increase of 4.6%.
Copper import and export data
According to customs data, the import volume of copper is much larger than the export volume, and the import volume of copper in 2024 is basically the same as that in 2023. The expected import volume of refined copper in China in 2024 is 3.51 million tons, a year-on-year decrease of 0.28%. The expected domestic export volume of refined copper in 2024 is 490000 tons, a year-on-year increase of 75.5%.
LME copper inventory affects copper prices
As shown in the above figure, the comparison between LME copper inventory and copper prices shows that copper prices and inventory are inversely proportional, with LME copper inventory falling and copper prices rising; LME copper inventory rises, while copper prices fall. The judgment of copper prices can be predicted based on LME copper inventory. As of December 31st, LME copper inventory was 271400 tons, up 38.94% from the beginning of the year.
In terms of demand
Copper apparent consumption
As shown in the above figure, according to the statistics of Shengyi Society on the apparent consumption of copper in China in recent years, except for the period from 2015 to 2017 when some manufacturers stopped production and production due to the decline in copper prices, the apparent consumption of copper has decreased. In other years, except for the impact of the pandemic in 2021, the apparent consumption of copper has been increasing year by year. According to data statistics, the apparent consumption in 2024 was 16.4128 million tons, and the annual apparent consumption in 2024 was higher than that in 2023.
Domestic copper terminal consumption is mainly concentrated in industries such as power cables, home appliances, automobiles, and real estate. Among them, power cables account for nearly 37%, buildings account for 21%, household appliances (such as air conditioning and refrigeration equipment) account for 15%, and the automotive industry accounts for 8%.
Power cables:
The growth rate of completed power grid investment and construction from January to October this year exceeded expectations by 20%, far higher than the same period in the past two years. Conservatively, it is expected that the growth rate of power grid investment in 2025 will maintain a 6% growth rate, which will bring a 3% growth boost to overall copper consumption. The investment targets of State Grid 609.2 billion and Southern Power Grid 195.3 billion for the power grid in 2024 will continue to break post epidemic records. It should be noted that the completion rate of power grid investment and construction from January to October has reached 74%, which is higher than the historical average of 70% and close to the high level of 2017. It is expected that the growth rate of copper investment and construction in the domestic power grid will be limited by the end of the year. In addition, the core of State Grid at present and in the future is the dual wheel drive of ultra-high voltage and smart distribution network. It is expected that more incremental cable orders in the future will be related to aluminum and aluminum alloys.
Construction and completion of real estate across the country
The negative growth rate of construction and completion is expected to stabilize, but copper used in construction will still be a drag. This year, the growth rate of completed area in China has decreased much more than expected compared to last year’s high base, while the growth rate of new housing construction has been sluggish and has not improved. The cumulative completed area in the first 10 months of this year decreased by 24% year-on-year, with an annualized decrease of 8.36%. The cumulative newly started area in the first 10 months decreased by 23% year-on-year, with an annualized decrease of 24.5%. Although China further introduced stimulus policies in the third quarter of this year, considering the current sluggish sales of pre-sale housing in the residential sector and the 2-3 year lag in sales of completed real estate companies, even strong stimulus policies have a transmission period of physical tools. Therefore, it is expected that the growth rate of construction area in 2025 will remain at a level of -15% to 25%, which is the same as the negative growth rate in 2024. The neutral estimate is that there will still be a 20% year-on-year negative growth rate for copper used in construction (excluding household appliances), which will drag down overall consumption by about -4.4%.
The home appliance industry: In 2024, home appliance consumption exceeded expectations, mainly due to the overseas replenishment cycle and China’s trade in subsidy policy. Under domestic and foreign policies and cycles, the production growth rates of air conditioners, refrigerators, freezers, and washing machines in China reached 8.2%, 8.5%, 15.2%, and 6.7% respectively in the first ten months of this year. Considering the current high inventory of air conditioners in China and the fact that the boost to the home appliance industry this year is mainly related to policy support, the sustainability of industry recovery is expected to be limited. It is expected that the growth rate of home appliance consumption will slightly decline to 5% by 2025, and it will still maintain strong resilience in the copper consumption field.
Automobile production
In terms of automobiles, the growth rate of China’s automobile production in the first ten months of 2024 was only 3%, far lower than the cumulative year-on-year growth rate of the same period from 2021 to 2023, mainly due to the current high base of China’s automobile production. After reaching a peak of 33% in 2021, the penetration rate of China’s automobile production has fallen to 32% in 2022-2023. Combined with the trend of slowing down the growth rate of production in 2024, it is expected that the penetration rate of China’s automobile production will continue to fall to 31% to 32% in 2024.
3、 Factors influencing 2024
Add crude copper smelting capacity by 2025
By 2025, it is expected that an additional 1.27 million tons of crude copper smelting capacity will be released globally, which is a decrease from the 1.68 million tons of new capacity in 2024. However, the conflict between mining and metallurgy will continue. This year, global smelting capacity is still concentrated in Asia, with China contributing 54% of the increase and Indonesia contributing nearly 30% of the increase. In 2025, the global crude refining capacity growth rate will slow down, and China’s contribution will decline to 32%, while the Kamoa project in the Democratic Republic of Congo will contribute 38% of the increment.
The peak period of mining processing fees has passed
Without considering whether the Panama copper mine will resume production or not, it is expected that the global copper mine production will increase by about 780000 tons in 2025, a slight decrease from last year, indicating that the tight mining situation will continue. Global copper mining project reserves are gradually depleting, with few new projects and limited ore supply. Global copper production is expected to decrease by 0.3% in 2024, and although it is expected to increase by 1.2% in 2025, the increment is far lower than the newly added smelting capacity, and some copper mines are experiencing production cuts. Although new and old mines are resuming production under the stimulation of high copper prices, the tight supply situation is difficult to fundamentally reverse, which will fundamentally support copper prices.
Copper mine supply remains tight in 2025
Without considering whether the Panama copper mine will resume production or not, it is expected that the global copper mine production will increase by about 780000 tons in 2025, a slight decrease from last year, indicating that the tight mining situation will continue.
Global copper mining project reserves are gradually depleting, with few new projects and limited ore supply. Global copper production is expected to decrease by 0.3% in 2024, and although it is expected to increase by 1.2% in 2025, the increment is far lower than the newly added smelting capacity, and some copper mines are experiencing production cuts. Although new and old mines are resuming production under the stimulation of high copper prices, the tight supply situation is difficult to fundamentally reverse, which will fundamentally support copper prices.
The utilization rate of smelting capacity has decreased
Due to the reduction in ore supply and the relative excess investment in smelting capacity in the past, the utilization rate of smelters has dropped below 70%, increasing smelting costs and limiting the rate of production increase for refined copper, thereby supporting copper prices.
Copper concentrate processing fees decrease
Due to tight supply, copper concentrate processing fees are expected to significantly decrease by 2025, possibly reaching a 15 year low. Some smelters are facing profit pressure and may delay production or maintenance, reducing market supply and supporting copper prices.
Demand growth in the field of new energy
The new energy vehicle industry continues to develop, and it is expected that the global sales growth rate of new energy vehicles will be around 23.85% by 2025, which will bring a new increase in copper demand of 656000 tons, and the growth rate may slightly decrease. In addition, the demand for copper in new energy sectors such as photovoltaics and wind power is steadily increasing, providing strong support for copper prices.
Macro policies stimulate demand
Looking forward to 2025, there is great uncertainty for the Federal Reserve to cut interest rates. The European Central Bank and the Bank of Japan will gradually enter a wait-and-see state, and the People’s Bank of China may implement moderately loose monetary policy. The future trend of the US dollar may remain high, putting some pressure on copper prices in the external market. The RMB exchange rate may be weak, and copper prices in the domestic market may continue to be stronger than those in the international market.
4、 Summary and prediction
2024 is a turbulent year for the copper market, with significant fluctuations and a wide range of trends. The second quarter reached a historic high. Overall, the global copper market is in a pattern of oversupply in 2024. This is also the fundamental reason why copper prices cannot be sustained after a rapid rise.
Looking ahead to 2025, the global copper market supply and demand pattern will gradually shift from oversupply this year to supply-demand balance. The significant decrease in smelting costs (TC/RC) has put significant operational pressure on a large number of domestic smelters, and the tight supply of copper concentrate will begin to constrain the production of electrolytic copper. The downstream demand growth rate is expected to accelerate compared to 2024, and China and the United States are expected to initiate active inventory replenishment. Domestic power grid investment, household appliance consumption, and new energy vehicle production are all expected to maintain high growth rates. Overseas demand is expected to gradually recover with further interest rate cuts by global central banks, and global copper inventory levels are expected to decrease year-on-year.
Copper prices are expected to maintain high levels in 2025, but it is difficult to break out of the trend market. The annual volatility is expected to be smaller than in 2024, and the low point for the year is expected to be higher than in 2024, but the high point is difficult to break through. In the first half of the year, due to factors such as tight supply, peak demand season, and policy expectations, copper prices may show a fluctuating upward trend and are expected to hit above $10000/ton. In the second half of the year, as the risk of a US economic downturn increases and market demand relatively weakens after some peak demand periods, copper prices may face some downward pressure. However, due to the continued tight supply situation, the possibility of a significant drop in copper prices is relatively small, and it is expected to fluctuate and adjust within a high range.
http://www.lubonchem.com/ |