At the 2024 (19th) SMM Copper Conference and Copper Industry Expo - Copper Bar Industry Development Forum, jointly organized by Shanghai Nonferrous Metals Network (SMM) and Shandong Hengbang Smelting Co., Ltd., Liu Lu, senior analyst of SMM Copper, introduced the current situation of the copper rod market in 2024 and looked forward to its future.
The current supply status of the copper rod market
The copper rod industry is located in Zhejiang, and large enterprises have more than half of the share
Copper rod enterprises are mainly concentrated in Zhejiang, accounting for more than half of the national market, followed by Jiangxi, Guangdong, Anhui, of which Jiangxi and Anhui are subject to preferential tax policies and gather copper rod enterprises. As more than half of the country's copper rod enterprises are gathered in Zhejiang, the local upstream and downstream industries are also relatively developed.
The concentration of the copper rod industry is relatively high, and the production capacity of large enterprises accounts for more than half of the country's production capacity, but the number of enterprises accounts for no more than 20 percent, and there are no more than 10 representative enterprises with an annual production capacity of more than 100,000 tons, mainly Jintian, Bowei, Keyu, Changzhen, etc.
Note: The annual production capacity of large enterprises ≥ 50,000 tons> the annual production capacity of medium-sized enterprises ≥ 20,000 tons> the annual production capacity of small enterprises
Continuous casting rods account for about three-quarters of the copper rod market share, and the market is more competitive
Copper rods are divided into continuous casting rods and extrusion rods, and the continuous casting rod market occupies about three-quarters, which is determined by market demand, but it also leads to a large number of enterprises entering the continuous casting rod market, with serious overcapacity, fierce competition between enterprises, and a gradual reduction in processing costs. The number of enterprises participating in the extruded rod market is limited, and the fierce competition is much weaker than that of the continuous casting rod market, but the overall market demand is also relatively limited.
As can be seen from the table on the right, large copper rod factories can produce continuous casting rods and extruded rods at the same time, and occupy both quantitative and technical advantages, resulting in the copper rod market being occupied by large enterprises to occupy the majority of the share. The rest of the companies that produce extruded rods hardly produce continuous casting rods, and mainly focus on extruded rod orders.
The growth rate of copper rod capacity expansion is extremely low, and the annual output of the country is difficult to grow
In the past five years, there have been few new expansion enterprises in the copper rod market, and only some small manufacturers have been added in Yuhuan. According to SMM, there is no obvious expansion plan for large-scale copper rod factories, and more focus on technological transformation and improvement of production lines.
From the perspective of output growth, only in the first year after the epidemic, due to the resumption of normal production, there was a significant increase, and the subsequent growth rate turned low, and enterprises are not optimistic about the market outlook.
From the perspective of copper rod operating rate, due to weakening market demand, the operating rate in 2023 will decrease significantly compared with 2019, but the seasonal trend still exists, mainly after the Spring Festival and in the fourth quarter.
The current situation of copper rod market demand
Sanitary products are the main downstream of copper rods, but they are heavily dragged down by real estate
The application of copper rod mainly includes the following industries: bathroom products, hardware accessories, refrigeration accessories, auto parts, communication products, electrical accessories, etc., but the largest market share is bathroom products, the industry is closely related to the real estate market, in recent years, it has been dragged down greatly, and the performance is not sluggish.
Domestic commercial housing sales are under pressure, and the demand for sanitary products is weak
In the past two years, the cumulative sales of commercial housing in mainland China have been negative year-on-year for most of the time, which shows that the housing market is in a downward stage and the pressure on housing sales is greater. Bathroom products have been affected by this, and the demand has declined significantly.
According to SMM, after returning after the Spring Festival in 2024, most companies said that the order recovery is acceptable, and only the demand for sanitary products continues to be weak.
The strong performance of the refrigeration industry supported the copper rod market
In the environment of economic pressure, the performance of the refrigeration industry is relatively strong, the increase in air conditioning output is more obvious, the demand for check valves is more, copper rod enterprises actively strive for refrigeration orders, and constantly reduce processing fees, and the market competition is becoming increasingly fierce. According to SMM, at present, the processing cost of refrigeration-related products is decreasing, and copper rod enterprises have almost no profits, which has become more of a means for large enterprises to increase production.
The demand for auto parts is relatively stable, but the downstream settlement period is longer
China's auto production and sales remained relatively stable, even against the backdrop of the epidemic and economic pressure, auto sales did not decline significantly, and the demand for auto parts remained relatively stable.
With the rise of new energy vehicles, the proportion of new energy vehicles in the total number of vehicles is increasing, and the proportion of traditional vehicles is decreasing. Some connectors and other components of new energy vehicles will use high-performance alloys, but there is a certain technical threshold for production, and only some enterprises can produce them.
According to SMM, the traditional auto parts in the market are relatively stable, but there is a certain account period, and there are also differences in the acceptance of the account period of copper rod enterprises.
The demand of the communication industry is declining year by year, and it is difficult to increase the demand for copper rods
It can be seen in the figure on the left that the output of base stations is declining day by day and the growth rate has been negative, which is mainly due to the relatively complete construction of mainland communication base stations, even if they are upgraded from 4G to 5G networks, only some components can be updated, and the demand for copper is limited, which is difficult to become a future growth point.
As can be seen in the figure on the right, the growth rate of mobile phone production has also declined significantly in recent years, which is due to the improvement of mobile phone quality, the relative increase in service life, and the frequency of mobile phone replacement by purchasing groups has also declined. However, the growth in 2021 will be short-lived, and according to the estimation of the service life of mobile phones, 2024 may become an inflection point in the replacement cycle of mobile phones. In addition, the development of AI technology will open a new cycle of development in the communications industry, and the demand for new phones may increase. On the whole, although the current demand of copper rod enterprises in the communication industry is relatively stable, it remains to be seen whether it can take advantage of the opening of the new cycle and follow the rise in the future.
Copper rod market outlook
In 2024, copper prices will rise too fast to suppress downstream orders
In the first quarter of 2024, copper prices rose rapidly, and the supply of yellow miscellaneous copper in the mainland mainly depended on overseas, and the quotations of overseas traders were stronger than in 2023, with a large internal and external upside down, and traders were not highly motivated to receive goods.
According to SMM, after the sharp rise in copper prices, the procurement enthusiasm of downstream enterprises has decreased significantly, and copper rod companies are under greater pressure in April.
Due to the significant rise in copper prices in 2024, copper rod companies will be under pressure at both ends, raw material prices are high and in short supply, and downstream enterprises' purchasing willingness may be suppressed.
The property market will still be under pressure in the future, and it is difficult for the demand for sanitary ware to grow
From the perspective of the number of land transactions and real estate development investment, the downward trend is obvious year by year, and the number of new commercial houses will decline significantly in the next two years. The decline in the area of new construction of commercial housing is more significant, and the center of gravity has shifted sharply since 2022, and the new houses in the next year will also show a low level, which will cause a big blow to the domestic bathroom market.
SMM expects the growth rate of real estate completions to be -10%, which will drag down copper consumption by -2%, and it is expected that real estate will still decline significantly in the next two years.
It is difficult for domestic demand to have a growth point, and pay attention to overseas demand
Domestic demand is weak and difficult to have growth points, and the copper rod market needs to pay attention to overseas demand. It can be seen from the valve export data that although the total export volume in 2023 will be lower than before, it will be at a high level as a whole, focusing on the demand growth points of Southeast Asian countries and the Belt and Road Initiative. Furthermore. Exports of new energy vehicles (NEVs) are still strong, and although the growth rate has slowed, the growth is still in the positive range.