1.copper prices are expected to appear phase of the "explosive" market

January 13: Copper prices in 2020 rise and fall. In the first quarter under the impact of the epidemic, the market panic, copper prices once fell below $4,400 per ton, pierced most of the miners'cash costs. In the second quarter, the epidemic in Chile, Peru and other South American countries where the main copper mines are located began to deteriorate at an accelerated pace. Market concerns about the supply of copper mines intensified, and the processing fee TC continued to decline. As some large mining enterprises announced that operations such as mine production and transportation were blocked, copper prices accelerate.

In the second half of 2020, as China's economy continued to improve, Europe and the United States economic stimulus, the United States election ground, the vaccine push, copper prices hit record highs. At 2021, copper on the LME closed at $8,084.50 a tonne, up 31.05 per cent from the end of 2019 and the strongest in Non-ferrous metal.

2.in the first three quarters of 2020 copper mine output negative growth, processing costs at an absolute low

The output of the world's top 15 mining enterprises in the third quarter of 2020 has been affected by the epidemic situation and other factors, and the decline rate is still relatively large. Some mining enterprises have once again lowered their output expectations because they are worried about the epidemic situation, restricting the flow of personnel, raw materials and finished products, the uncertainty of copper production is still high due to the interference of recent mining strikes in South America.

3. the mining enterprises to see

Rio Tinto's production plunged 60,600 tonnes (- 28 per cent) . The delayed restart of the smelter and the decline in the copper grade of the mine have caused a 40 per cent decline in the united states-based Kennecott copper mine and a 74 per cent decline in smelting. The company cut its full-year forecast by another 30,000 tons because of the Kennecott smelter problem.

BHP2020 production fell 16,500 tons (- 4%) , ESCONDIDA mine due to the epidemic control mine operators and the decline in mine grade led to production damage, the company's 2021 production is expected to maintain 1.562 million tons.

Antofagasta production fell 27,400 tonnes (- 14 per cent) as a result of overhauls at Los Pelambres and a decline in the grade of the Antucoya copper mine. Annual production in 2020 is expected to remain at the lower end of the 72.5-75.5 range, but is still subject to the assumption that no mine will suspend production because of the epidemic.

MMG production fell by 13,400 tons (- 12 percent) in 2020. The company cut its production forecast for 2020 by 50,000 tons to 381,500 tons, with the LAS Bambas mine severely affected by the epidemic and transport.

The fall of 10,700 tonnes (- 11 per cent) in 2020 was mainly due to the impact of the outbreak on mining production in Brazil and Canada, as well as the overhaul of the Sudbury mine and the decline in the grade of the copper mine. Annual production is expected to remain at 370,000 tons.

First Quantum's output increased by 18,900 tonnes (+ 10 per cent) , mainly due to record increases in Sentinel and Cobre Panama as operations recovered. Freeport's output fell slightly by 9,100 tonnes as the company raised its 2020 sales forecast by 13,600 tonnes based on current production conditions and its assessment of mines.

Anglo American's production increased by 0.68 million tons (+ 5 percent) , and the company expects copper production to remain unchanged at 645,000 tons in 2020. Considering the epidemic situation of main producing areas and the output expectation of mining enterprises, it is expected that the recovery of output of copper mine is limited in the short term, and the TC of copper mine processing fee is difficult to rise substantially.

4.2021 copper production recovery growth, but probably in the second half of the year will have a substantial performance

According to production forecasts from some of the world's largest copper mining companies, the recovery of 2021 production is mainly a restorative increase in the disturbance of the 2020 epidemic, and the release of endogenous copper production capacity is relatively insufficient. Some of 2021's biggest new projects, such as Zijin's Kamoa-kakula Project in Congo, will not start production until July.

Recovery Increment, the current overseas epidemic situation is still more serious, copper mine production to restore to the pre-epidemic level estimated in the second quarter, the first half of the relative shortage of copper mine state probability is difficult to change.

We expect global copper production to increase by 917,000 tonnes, or about 4% , but the 2021 is likely to continue to face a relative shortage in the first half of the year as the epidemic picks up pace and new capacity is released in the second half.

5. The short-order processing fee has been reduced to less than 50 US dollars per ton, and the operating pressure of the copper smelter has been greater

Benchmark, China copper, Tongling nonferrous, Jiangxi Copper and Jinchuan Group and Freeport determined that the 2021 copper concentrate cost $59.50 per metric ton, down $2.50 per metric ton from 2020, supporting the current market for 2021 copper mine growth is not particularly optimistic.

Based on the foregoing analysis, we believe that TC processing fee is unlikely to rise substantially before the first half of the 2021, and will rise steadily in the second half of the year after the gradual release of copper production. Some domestic smelters have lost money to the cash cost, but because most of the smelting capacity is owned by state-owned enterprises, the profit has a relatively passive influence on production, and the fermentation period of reducing production is prolonged.

6.The domestic economy continues to improve, overseas recovery is expected to be strong, the overall market sentiment is good

The domestic economy continues to improve. Domestic economic normalization, copper downstream industries gradually recovered, including export-related and automobile, home appliances and other sectors performed bright, 2021 as the domestic macro-economy continues to repair, copper consumption overall is expected to maintain a high degree of prosperity.

Overseas, with the advance of the vaccine, the economies of Europe and the 2021 are expected to gradually recover, and from a manufacturing perspective, the economies of Europe and the United States are continuing to expand, favorable domestic consumption of copper downstream terminal products (China's exports to overseas copper intermediate products superposition terminal products accounted for more than 20% of domestic refined copper consumption) .

Rhythm, we believe that the first half of 2021 copper consumption as domestic and foreign economies recover from the epidemic, is expected to resonance, the second half of copper consumption due to domestic high base and other reasons are relatively weak.

Economic Stimulus, vaccine push, and further easing of market sentiment are probability events that support the financial properties of base metals. We believe that 2021 in the supply and demand, financial properties of the resonance, copper prices are expected to emerge phase of the "explosive" market. 

Source: Futures Daily

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