August copper prices are inferior to other non-ferrous metals, but the cumulative increase is not small. Especially LME Lun copper, in August rose nearly 7%, quietly approaching 7,000 US dollars / ton. From the supply and demand fundamentals, copper prices support factors still exist, is expected to continue a strong pattern.
Copper supply elasticity still no relief
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2017 – 2019, the new copper mine supply is not much, in 2017 the total production of small and medium-sized mines about 20.8 million tons. While the 2018 small and medium enterprises is expected to increase the amount of 285,000 tons; 2019 is expected to increase production of 245,000 tons. Therefore, the total supply of refined copper is largely dependent on the supply of copper concentrates, and the supply of refined copper will remain if global demand remains moderate due to lower supply growth. However, since the end of 2016, copper prices rose sharply, the future prospects of investment is very large, mainly concentrated in Peru, Chile and other countries, of which Peru’s potential investment capacity can be as high as 3.5 million tons, Chile, about 2.95 million tons, plus Ecuador 1 million tons, as well as other countries may invest in production capacity, the overall global potential capacity increase can be as high as nearly 8 million tons, but due to strong copper construction cycle, even if the immediate investment is expected to peak at least until 2022, Therefore, 1-2 years do not have to worry about copper oversupply.
Copper concentrate processing fee is low
CSPT set the third quarter processing fee bottom line of 86 US dollars / ton, 8.6 cents / lb, but since its set processing fees since the bottom line, the spot market processing fees continued to hover in the 79-85 US dollars / ton, 7.9-8.5 Cents / pound, continued lower than the processing company set the processing of the bottom line, limiting smelting enterprises from the spot market to purchase copper concentrate, thereby limiting the refined copper production. With the fourth quarter approaching, China refined copper production capacity or continue to put, while the copper concentrate supply elasticity is relatively small, which will further intensify the contradiction between copper supply and smelting capacity. In addition, the fourth quarter is also facing annual processing fees negotiations, smelting enterprises and mining between the game or more intense, whether it is smelting enterprises to reduce the spot copper procurement or mining reduction copper mine are not conducive to the release of refined copper production.
In addition, the current spot market processing fees have been approaching the smelting business smelting profit and loss line, if the fourth quarter once again smelting capacity to run, or make the processing fee below the overall profit and loss balance of smelting enterprises, will eventually make smelting production forced to decline. As a result, the supply of refined copper in the coming quarter is limited.
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It is estimated that in 2017 China’s refined copper demand increase or 300,000 tons, while the August tracking situation shows that the main energy of the national grid basically the same, still on the elimination of renewable energy, to expand the field of alternative energy, these copper demand Pulling limited. However, with the passage of time, after entering the fourth quarter, short-term consumption season season has a certain role in promoting, mainly the current industry chain inventory are relatively low. The key to the demand for copper in the Trump infrastructure plan is whether the grid can be modified. Even if the implementation of the entire cycle dragged on a long, supply enough time to achieve matching.
In August, the world’s three major exchanges inventory, LME inventories fell 69,000 tons, COMEX inventories increased by 11,000 tons, SHFE inventories increased by 0.5 million tons, the global inventory in August net reduction of 53,000 tons. Due to refined copper supply elasticity is getting lower and lower, we believe that the overall decline in copper stocks into the pattern.
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