1.Copper Inventories in Major Chinese Markets Add 18,700 mt from last Friday

As of Monday January 16, SMM copper inventory across major Chinese markets stood at 154,200 mt, up 18,700 mt from last Friday and 61,700 mt from the same period last year when the data was 92,500 mt. The inventory in all major markets rose except that in Zhejiang, Jiangxi and Chongqing. In detail, the inventory in Shanghai added 6,500 mt to 98,400 mt, the inventory in Guangdong rose 6,000 mt to 15,100 mt, the inventory in Jiangsu grew 6,000 mt to 33,600 mt, the inventory in Chengdu increased 100 mt to 600 mt, and the inventory in Tianjin grew 100 mt to 1,500 mt.

The higher inventory in Shanghai, Jiangsu and Guangdong over the weekend was contributed by the delivery of the SHFE 2301 copper contract. In addition, the downstream consumption continued to weaken as some downstream producers were on CNY holiday. In Guangdong, the nearby smelters increased the shipments with the end of maintenance, while the downstream consumption weakened, thus the growth of inventory was higher than that of the previous two weeks.

SMM learned that some goods still cannot be moved to the warehouses due to logistics suspension near the Chinese New Year. Therefore, the social inventory will grow only slightly this week.

 

 

 

 

 

 

 

2. TCs of Spot Copper Concentrate Trend lower in the Sluggish Market

 As of Friday January 13, the SMM Imported Copper Concentrate Index (weekly) stood at $83.97/mt, $0.66/mt lower than the previous week. Spot copper concentrate trading was sluggish last week. According to SMM survey, 10,000 mt of mixed ore, which were scheduled to be shipped in February and March, were traded at TCs of $87-89/mt. Disturbances on the supply side put a certain pressure on the TCs, and the market witnessed a fall in TCs offered by buyers and sellers. Recently, some smelters have had some demand for clean concentrates which were scheduled to be shipped in February and offered the TCs of $81-85/mt. US Mission Mine frequently quoted copper concentrates which were scheduled to be shipped in January, and the TCs were $82-83/mt.

According to foreign media, Copper Mountain Mine in Canada resumed its production after being attacked by ransomware on December 27, 2022 (SMM predicts that the copper output of Copper Mountain Mine will be 45,000 mt in 2022). First Quantum started negotiations with the Panamanian government on a new agreement, which will increase the taxes and fees paid by the company. Federico Alfaro, Panama's Minister of Industry and Commerce, said that there are fundamental differences between the two sides on issues such as royalties, loss deduction, tax avoidance, value-added tax, etc., and the information given by First Quantum to investors is misleading. First Quantum responded that it was ready to appeal the Panamanian government's order to stop the production of the Cobre Panama copper mine. According to SMM research, First Quantum has promised a Chinese smelter that it can deliver the cargoes in January. Moreover, rumours said that China may resume importing copper concentrates from Australia, but according to SMM survey, the news needs to be further confirmed. At present, no smelter has purchased copper concentrates from Australia.

According to SMM data, as of last Friday January 13, inventory of copper concentrates across five Chinese ports stood at 759,000 mt in physical content, up 34,000 mt WoW. According to the customs data, China imported 2.1 million mt of copper ore and concentrate in December 2022, up 2.1% on the year but down 12.8% on the month. According to SMM survey, some mines said that the impact of the fire accident at Ventanas port on the shipment of copper concentrates may last for several months. Besides, the Las Bambas copper mine still cannot ship goods smoothly. News of China resuming copper concentrate imports from Australia has not been verified yet. The short-term copper concentrate supply can hardly improve. The pricing coefficient of domestic spot Cu 20% copper concentrate stood at 88.5-89.5% on a delivery-to-factory basis.

 

 

 

3. Copper Prices Move Rangebound with Some Ups amid the Expected Bullish Macro Factors at Home and Abroad

The market once expected the US Fed to slow down rate hikes as US non-manufacturing PMI did not reach the expected high. Last Thursday, the US December CPI growth rate fell to 6.5%, which further confirmed the market’s expectations for the Fed’s possibly slower rate hikes on February 1. According to the CME FedWatch Tool, the probability that the Fed will raise interest rates by 25 basis points at the February meeting is 79.2%. The US dollar fell sharply to around 101 last week, while copper prices rose. According to statistics, the total monthly financing of Chinese real estate companies in December 2022 exceeded 100 billion yuan, a month-on-month increase of more than 80%. And many provinces and cities in China successively introduced real estate-related support policies. The tone of Chinese policies is set optimistic, making the market more confident in the mid and long-term economic development.

On the fundamental, most small and medium-sized enterprises took the CNY holiday last week, and a small number of large enterprises will begin the holiday early this week. Companies that maintain the operation this week will generally cut the production amid poor terminal demand and high in-plant inventories of finished products. According to SMM’s latest data, as of last Friday, copper inventory across major Chinese markets totalled 135,500 mt, up 86,600 mt YoY. The bonded zone inventories will grow in the near future amid closed import window. But the smelters can export instead, hence the possibilities of the inventory accumulating after the Chinese New Year will decrease. LME copper prices rose last week and once hit a seven-month high, while SHFE copper prices grew much slower. The most-traded SHFE copper is expected to move between 66,000-69,500 yuan/mt this week, and LME copper will trade between $8,550-9,200/mt.

Spot premiums will fluctuate with some ups early this week affected by the spread between the front-month and next-month contracts. Afterwards, the premiums will drop with lessmarket participants remaining in operation approaching the Chinese New Year. SMM presumes that the spot premiums may move between 0-100 yuan/mt this week.

4.Copper Plate/Sheet and Strip Output in 2022 Down By 10% due to Sluggish Downstream Demand

In the past year of 2022, major domestic macro and social events have had a negative impact on the copper processing sectors, thus restricting the output of copper semis products. According to SMM statistics, China's copper plate/sheet and strip output dropped 9.9% YoY or 289,600 mt to 2.64 million mt in 2022.

Such a significant decline is conspicuous, and the reasons behind are down to the changes on the macro front and social events.

First of all, the macro-economy entered a downward cycle with persistent sluggish demand. The boost from successive economic stimulus policies to the output of copper semis products was short-lived, failing to reverse its downward trend. At the same time, the monthly copper plate/sheet and strip output lacked special momentum compared with previous years.

Secondly, in the first half of 2022, Shanghai, one of China's major hub of copper cathode trading, was lockdowned in order to contain COVID-19 pandemic. As a result, the raw material supply to the copper processing enterprises were terribly inhibited, leading to lower copper plate/sheet and strip output.

Finally, at the end of the second quarter and the beginning of the third quarter of 2022, the most-trade SHFE copper contract remained low despite the recovery. Therefore, when there was no significant improvement in downstream demand, some copper plate/sheet and strip companies suffered great losses and even restored to vicious competition for lower prices. In this context, the copper plate/sheet and strip output declined under the pressure.

5. Lithium-Ion Battery Copper Foil Output Drops Slightly in December amid Slowing New Orders of Motive Batteries, to Fall Further in January

Copper foil output stands at 72,300 mt in December

According to SMM statistics, output of copper foil stood at 72,300 mt in December 2022, a month-on-month increase of 0.63%, basically in line with expectations. The output of copper foil for lithium batteries was 46,300 mt, a slight decrease of 0.3% from the previous month. The output of copper foil for electronic circuits was 26,300 mt, an increase of 2.34% from November. This is according to an SMM survey of 22 producers with a total capacity of 970,000 mt.

End-user consumption has weakened due to the ending of the national subsidy on new energy vehicles, dragging down the new order index of the lithium-ion battery copper foil industry. Moreover, some build-outs (plants that expanded lithium-ion battery copper foil capacity for the first time) switched to produce copper foil used in electronic circuit immediately following trial production of lithium-ion battery copper foil. This is because the certification of copper foil products, which play a key role in the composite performance of lithium batteries, is typically more stringent. And the certification usually takes over six months. As such, lithium-ion battery output skid.

Most manufacturers are currently moving full speed ahead, producing for orders placed by copper clad laminate plants.

Copper foil output to stand at 68,800 mt in January

Output of copper foil is expected to fall 4.87% month-on-month to 68,800 mt in January. January-February is the peak season for copper foil. Automakers are rushing to produce and make deliveries in the beginning of the year. But consumers have advanced their car purchases before the ending of national subsidies of new energy vehicles, waning the demand in 2023. This has resulted in a decline in the operating rates of lithium battery copper foil manufacturers.

Downstream producers placed orders in December as they closed early for Chinese New Year holidays, waning orders in the electronic circuit copper foil industry in January. Demand has diminished as the CNY holidays nears. And production schedules decreased. Some enterprises will undertake maintenance during CNY holidays, with output falling sharply.