Global copper mines are exacerbated by extreme weather and resource protection in the short term, and the long-term supply increment and growth rate will gradually decline [SMM Copper Summit]
At the 2024 (19th) SMM Copper Conference and Copper Industry Expo - Copper Raw Materials and Consumption Development Forum, jointly organized by Shanghai Nonferrous Metals Network (SMM) and Shandong Hengbang Smelting Co., Ltd., Dong Qiaolong, general manager of the marketing branch of Western Mining Co., Ltd., shared the current situation of supply and demand in the copper concentrate market.
Part I: Global Copper Concentrate Market
(1) Global copper ore resources
According to the 2023 data of the China Geological Survey, the global copper ore reserves are 820 million tons and the resources are 1.92 billion tons.
International Copper Research Group (ICSG): Global copper mining capacity will be 28.25 million tons in 2023, an increase of 4.4% year-on-year.
World Bureau of Metal Statistics (WBMS): Global copper mine production in 2023 will be 22.36 million tons, an increase of 3.4% year-on-year.
(2) The reasons for the long-term downward trend of global copper mine capacity utilization
The growth rate of global mine copper production is significantly lower than the growth rate of mine capacity, which can be clearly observed through the utilization rate of mine capacity. Profit margins and unforeseen disruptions can only explain the phased fluctuations in mine capacity utilization, and there are two fundamental reasons:
1. It is becoming more and more difficult to find high-quality copper ore resources in the world, especially after 2015, the global copper ore resources are extremely low, and the average cycle from copper ore to output is more than 10 years, and it is foreseeable that the increase in global mine production capacity after 2025 is very limited.
2. The downward trend of the global average grade of copper ore since 1998 is particularly obvious, which can fully explain the long-term downward trend of mine capacity utilization and the gradual depletion of global copper ore resources.
(3) The main increase in overseas copper mines
According to the new and expansion plans of major mining enterprises, it is expected that overseas copper mine production will increase by 780,000 tons in 2024, of which Chile and the Democratic Republic of the Congo will contribute the main increase, increasing by 350,000 tons and 260,000 tons respectively. 2024 is a global election year, and it is expected that the mine will usher in many disruptions caused by political, environmental or labor issues.
(4) The interference of overseas copper concentrate has increased
Major Interferences:
1. The First Quantum CobrePanama Copper Mine was judged to be unconstitutionally suspended, and the current market is expected to suspend production until mid-24 years, affecting about 300,000 tons of output.
2. Anglo American lowered its 2024 production guidance, announcing that it would lower its 2024 copper production guidance to 73-790,000 tons from the original 91-1 million tons, with a median cut of 195,000 tons.
3. Glencore issued a report saying that the output of copper, nickel and cobalt will decline in 2023, and warned that the output will be further reduced this year. Copper production in 2023 is 1.01 million tonnes, down 5% from 2022, and copper production is expected to be between 95-1.01 million tonnes in 2024.
Potential Interference:
Indonesia's Ministry of Mineral Resources will allow copper and copper concentrate anode slurry to continue to be exported in 2023, but if the Manyar smelter under construction in Indonesia's Freeport cannot be renewed after the temporary exemption expires in May 2024, the company may accumulate a large amount of copper concentrate and be forced to reduce production. According to Reuters, the smelter is expected to start operations in May 2024 and will need to reach production in five to six months, with the company needing to reduce ore production by 40% in 2024 if the company is not allowed to export copper concentrate until the smelter reaches capacity.
The total output growth rate of the top ten leading mining companies in 2023 will be only 1%, among which the decline in the output of the four major mining companies of Chilean Copper, Glencore, First Quantum, and Polish Mining has become the main reason for the growth of global copper mine production in 2023. In terms of the planned output of the top ten copper mining enterprises in 2024, their total output will be 2.9% lower than that in 2023 according to the median value of the plan.
(5) Summary
In the short term, factors such as extreme weather and resource conservation will intensify the disturbance of global copper mines. In the long run, as the growth rate of existing projects continues to decline, it is difficult to continue the increment due to the lack of capital expenditure in the early stage. It is estimated that the global copper mine output in 2024 will be 22.76 million tons, with an increase of about 400,000 tons, with a growth rate of 1.8% (the global copper mine increase in 2023 will be 740,000 tons, with a growth rate of 3.4%), and the global copper mine supply increase and growth rate will gradually decline.
Part II: China's Copper Concentrate Market
(1) The current situation of China's copper ore resources
China Mineral Resources Report 2023: In 2022, the mainland's copper ore reserves were 40.77 million tons, accounting for 5% of the world's total reserves.
Distribution of copper ore resources in mainland China: Tibet is the largest copper ore distribution area in mainland China, accounting for 31% of the country's total reserves; Jiangxi's copper ore reserves account for 19% of the country's total reserves; Yunnan's copper reserves account for 13% of the country's total reserves.
Characteristics of copper ore in mainland China: Copper mines in mainland China are mostly small and medium-sized mines, and there are many poor mines, few rich ores, more pit mining, and few open-pit mines, which makes the mining efficiency of copper mines in mainland China low and the cost high.
(2) Top 10 copper mines in China
It introduced the reserves and production capacity of domestic copper mines such as Duolong Ore Cluster, Julong Copper Mine and Yulong Copper Mine.
(3) The development of domestic copper mines
In the 2021-2025 mine planning of major regions in China, the increase of copper mines in different regions shows obvious structural changes. The increase in copper mine output in Jiangxi, Yunnan, Anhui, Heilongjiang and other places is limited, but the growth potential of copper mine output in Tibet is huge. At the same time, through the market and other means, optimize the scale structure of mineral resource development and utilization, limit the mining scale of the minimum copper ore, and increase the proportion of large and medium-sized mines, which indicates that China's future copper mine output will be concentrated in large-scale mines.
(4) Major domestic copper mine projects
In the past two years, China's new copper mine expansion projects mainly include Wushan Copper Mine Phase 3 Project, Chengmenshan Copper Mine Phase 3 Project, Tibet Yulong Copper Mine, Tibet Julong Copper Mine, and Tibet Junuo Copper Mine. In addition, it is expected that after the Duolong copper mine is put into operation in 2027, the initial production capacity design will reach 300,000 tons, and the output of the domestic "four dragons" - Duolong, Julong, Yulong and Huatailong copper mines is expected to reach 1.2 million tons, which will alleviate the problem of insufficient supply of domestic copper concentrate production.
(5) Domestic copper concentrate production
In 2023, the output of copper concentrate in domestic copper mines decreased significantly year-on-year due to production accidents (Jiama Copper Mine was ordered to stop production in March 2023 due to the danger of overflow from the tailings pond, and gradually resumed production on December 15, 2023), declining grades, and increased shutdowns caused by environmental protection policies. In 2023, domestic copper concentrate will be about 1.83 million tons, a year-on-year decrease of 6.6% from 2022.
According to the calculation of the output of major mines, it is concluded that the output of copper mines in Tibet will decrease by 23,000 tons in 2023, but will increase by 70,000 tons in 2024 and 106,000 tons in 2025
It is expected that domestic copper concentrate production will recover to 1.91 million tons in 2024, a year-on-year increase of 4.4%.
Summary analysis of the domestic copper concentrate market
China's copper mines are mainly distributed under the umbrella of large-scale smelting enterprises, such as Jiangxi Copper, Yunnan Copper, Tongling Nonferrous Metals, Daye Nonferrous Metals, Baiyin Nonferrous Metals, Zijin Mining, Western Mining and other smelting enterprises have important copper mines. According to statistics, the domestic mine output of these smelters accounted for 51.5% of China's total copper mine output in 2022. At the same time, the overall output of copper mines showed an upward trend, of which 83,000 tons in 2022 increased compared with 2021, which was basically the same as the increase of 84,000 tons in 2021.
From the perspective of specific enterprises, the output of copper mines of Zijin Mining and Western Mining has increased significantly, while the output of copper mines of other enterprises is relatively stable. The increase in copper deposits of Zijin Mining and Western Mining is mainly contributed by the Qilong Copper Mine and Yulong Copper Mine in Tibet, which is also in line with the mineral resource plan of "vigorously improving copper mineral energy" in Tibet, and it is generally believed that the domestic copper concentrate output will maintain a steady growth in the past two years.
Part 3: Changes in China's copper industry
(1) Distribution of copper industry
Jiangxi Copper Industry and Tongling Nonferrous Metals, which integrate copper mining, copper smelting and copper processing, are located in Jiangxi Province and Anhui Province respectively. Zijin Mining, Yunnan Copper and Daye Nonferrous Metals, the representative enterprises of copper mining and smelting are located in Fujian Province, Yunnan Province and Hubei Province respectively. The representative enterprises of copper processing, such as Jintian Co., Ltd., Hailiang Co., Ltd., and Bowei Alloy, are concentrated in Zhejiang Province.
(2) A new round of smelting capacity expansion has taken shape
From 2000 to 2023, China's smelting capacity expanded from 1.53 million tons to 13.67 million tons, and it is expected that the domestic copper smelting capacity will exceed 14 million tons by 2024. China's copper smelting enterprises can be divided into three echelons according to the scale of smelting capacity, the first echelon is Jiangxi Copper and Tongling Nonferrous Metals with a production capacity of more than 2 million tons; The second echelon includes Yunnan Copper, Jinchuan Group, and Daye Nonferrous Metals, with an annual copper smelting capacity of 100-1.5 million tons; The third echelon represents Zijin Mining, Nanguo Copper, Baiyin Nonferrous Metals and other smelting industries with an annual smelting capacity of less than 1 million tons.
(3) The procurement of domestic copper concentrate has been increased
According to the National Bureau of Statistics, domestic refined copper production will increase by 1.93 million tons to 12.99 million tons in 2023, a year-on-year increase of 17.4%; In 2024, 410,000 tons of new domestic crude refining capacity will be added, but due to the sharp decline in processing fees, domestic smelters may reduce production, and domestic copper refining copper production is expected to increase by about 500,000 tons to 13.5 million tons in 2024, a year-on-year increase of 3.8%.
According to SMM estimates, the annualized growth rate of China's copper refining capacity is expected to be 10% from 2023 to 2025, exceeding the 5% growth rate of refining capacity from 2014 to 2022.
(4) High dependence on overseas copper concentrate
Generally, in the absence of significant expansion of production, the output of copper smelters basically matches the production capacity. In the past decade, the mainland's refined copper output has increased rapidly from 6.8 million tons to 13 million tons, and the rapid expansion of production capacity has intensified the competition for copper concentrate, while the increase in domestic copper concentrate output is limited, resulting in the mainland's dependence on overseas copper concentrate exceeding 75%.
(5) Strategies to break the situation in the copper industry
In the face of the low TC operation, short-term copper smelters can respond by increasing the use of raw materials such as copper scrap, increasing long-term agreements, and jointly reducing production, but the production reduction may not be a long-term solution. In the long run, the vertical or horizontal extension of the industrial chain is a long-term breakthrough strategy for smelters.
(6) Upward layout: accelerate the construction of overseas projects
After years of practice, mainland enterprises have achieved remarkable results in "going out" to develop copper resources, many projects have been completed and put into operation, and there are still large-scale projects under construction and planned to be promoted, which has played a positive role in promoting the ability to guarantee copper resources in mainland China.
Its copper output will reach 1.01 million tons in 2023, becoming the only domestic enterprise with more than one million tons of copper minerals. Overseas projects mainly include: (1) Paigi copper-gold mine and Bor copper mine in Serbia, which will form a mineral copper production capacity of 300,000 tons by 2025; (2) Kamoa Copper Mine: Phase I, Phase II and the reconstruction and expansion project have been completed with a current production capacity of 450,000 tonnes, and the Phase III 5 million tonnes/year concentrator expansion plant and supporting 500,000 tonnes/year copper smelter are expected to be completed and put into operation in October 2024, when the annual copper mine production capacity will reach 620,000 tonnes. It will become the world's second largest copper mine, with an annual output of more than 800,000 tons of copper.
CMOC - a leading copper resource enterprise: It has 34.63 million metal tons of copper resources, with an output of 420,000 tons in 2023, a year-on-year increase of +51%. TFM Mixed Mine currently has a total of 5 production lines, and KFM has always maintained stable and high production, and it is expected that the copper output is expected to reach 600,000 tons in 2024 with the production of TFM Mixed Mine and the further release of KFM production capacity.
Tongling Nonferrous Metals - expected to rank third in China: In August 2023, it acquired the world's largest copper mine, the Mirador Copper Mine in Ecuador, which is currently in full production with an annual output of 121,000 tons of copper. The second phase of the project will be put into operation in the second half of 2025 and is expected to produce more than 140,000 tons of copper per year. After the Mirador copper mine is fully produced, it is expected to rank among the top 20 copper mines in the world, and Tongling Nonferrous Metals will also become the third largest copper producer of A-share listed copper companies.
(7) Downward extension: take the initiative to expand production capacity to high value-added products
In recent years, the overall growth rate of the copper downstream primary processing industry has remained stable, of which the output of copper rod, copper strip, copper tube, copper rod and copper foil accounts for 52%, 12%, 8%, 5% and 3% respectively, and some varieties such as copper strip and copper foil have a rapid growth rate.
summary
It is estimated that the global copper concentrate output in 2024 will be 22.76 million tons, an increase of 1.8% year-on-year. The global demand for copper concentrate was 22.86 million tons, an increase of 2.0% year-on-year. The supply shortage is 100,000 tons, and the gap is 50,000 tons larger than that in 2023.
►In 2002, the mainland's refined copper output was 1.63 million tons, ranking second in the world, but the copper content of self-produced copper concentrate was only 560,000 tons. After 20 years of development, the output of refined copper in mainland China has reached 13 million tons, with an average annual growth rate of 12%; The output of self-produced copper concentrate is less than 2 million tons, with an average annual growth rate of 6%. There is a serious mismatch between the growth rate of the smelting end and the ore end, and a large amount of imported copper concentrate is required.
► This year, as overseas mine production shrinks and overseas copper concentrate supply tightens, causing TC prices to fall back to record lows, smelters may increase maintenance and postpone production to support processing fees. It remains to be seen how strong and how long the smelter production cuts will be, and TC prices are expected to remain low for a long time, averaging around $30/mt per year.
》2024SMM 19th Copper Conference & Copper Industry Expo Special Report