Since March, copper prices have surged strongly under the double benefit of smelter production cuts and the Fed's dovish interest rate cut expectations, and have come out of a fast and smooth rise, with a maximum rise of about 6.2%. However, after hitting the 74,000 yuan/ton mark, copper prices fell again, and the overall trend showed a high fall. Looking forward to the future market, in the context of the expected easing of liquidity, the incremental demand for new energy and the tight supply of copper ore, so that the global refined copper supply and demand to a tight balance, copper prices are expected to continue to move up the operation center.
In March, the Federal Reserve interest rate meeting maintained interest rates unchanged, the dot plot maintained three rate cuts within the year, a rate cut of 75bp, and released a signal that it is about to start slowing down the balance sheet, the overall tone is dovish, the Federal Reserve's first rate cut point or in June. In the second half of the year, with the improvement of the monetary environment and the beginning of the global replenishment cycle, the long-term demand for copper has brought some good news.
Domestically, the two Sessions 2024 government work report proposed to "focus on expanding domestic demand, promote the economy to achieve a virtuous cycle", on the one hand to promote the stable growth of consumption, on the other hand to actively expand effective investment. Combined with the recent central financial conference proposed to promote a new round of large-scale equipment renewal and consumer goods to replace the old, demand expectations improved for copper prices also have some support.
Chart 1: China Copper Concentrate Spot TC(USD/ton)
Copper mine supply disturbance occurred frequently, and supply and demand changed from loose to short. 1) The first Quantum Cobre Panama copper mine was ruled unconstitutional to stop production, the current market is expected to stop production for 24 years, after the change of the Panamanian government to resume production, or affect about 150,000 to 200,000 tons of copper supply. 2) Anglo American lowered its 2024 copper production guidance to 73-790,000 tonnes from 91-1m tonnes previously. 3) Vale's second largest copper mine, Sossego, was suspended due to environmental concerns, involving copper production of 66,800 tons per year. 4) The reliability problems related to QB2 slope climbing have not been solved in 23 years, which is delayed to 24H1, and the production capacity slope is not as expected. The extension of the Salvador project also had a greater impact on the 24-year copper increment, with QB2 and Salvador reduced by nearly 100,000 tons combined. In addition, due to the impact of extreme dry weather, the production release of Carmen de Andacollo, Los Pelambres, Collahuasi and other copper mines still requires attention to the progress of desalination plants
TC continued to fall, smelting end production resistance. The increasingly severe raw material supply pattern has reduced China's copper concentrate spot TC from $31.9 / ton in early February to $10.1 / ton in late March, falling to the lowest level in 10 years, and smelting losses have expanded to 2,173 yuan/ton. Due to the continued low TC, domestic key refineries held a meeting and agreed to reduce the operating rate of loss-making capacity to cope with the supply shortage of raw materials. The meeting more certain smelter production reduction expectations, raising the market's bullish sentiment. Smelters will enter an intensive maintenance period in the second quarter, and 1.21 million tons of crude refining maintenance capacity was involved in April, significantly greater than the same period last year. Refinery production cut superposition maintenance period, March electrolytic copper production is probably the first half of the high.
The copper demand growth engine in the field of new energy will strongly support the medium - and long-term demand growth of copper. In the context of "carbon neutrality", the energy transition and downstream electrification support a better demand outlook for copper. Research by Calamos Investments shows that renewable power generation is five times more copper intensive than conventional grids. As China continues to promote the green and low-carbon energy transformation, the energy transformation continues to accelerate, and the proportion of scenery is expected to continue to increase. In terms of new energy vehicles, car companies have started a price war, and price cuts have a significant role in promoting sales. According to the passenger Association data, March 1-24 new energy vehicle market retail sales of 490,000, an increase of 39%, an increase of 84%. We expect the effect of the tram sales stimulus to continue in the second quarter, and the production of electric vehicles requires four times the copper than the internal combustion engine, and the intensive catalytic tram will significantly boost copper consumption.
To sum up, in the context of the Federal Reserve monetary policy is about to be broadened, the increase in new energy demand and the tight supply of copper, so that the global refined copper supply and demand to a tight balance, we believe that copper is a better medium and long term variety, it is recommended to hold the idea of going long on the dip.
