Global copper market outlook emerging from Covid-19
19
Global copper market outlook – emerging from Covid-19 Craig Lang Principal Analyst CRU June 2020
Transcript of Global copper market outlook emerging from Covid-19
Global copper market outlook – emerging from Covid-19
Craig Lang
Principal Analyst
CRUJune 2020
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2www.crugroup.com
3
LME 3M copper price, $/t
Phase I US-China
trade deal
Covid-19
related
lockdowns
spread to
RoW
Copper prices pick-up after Q1 slump; funds trim net short positions
-150
-100
-50
0
50
100
150
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20
Net Long Net Short Net Position
US CFTC managed money + other reportables, '000 lots
DATA : CRU, LME.
China government
stimulus
Funds turn bearish
on global macro
concerns
US-China trade
tensions flare up
www.crugroup.com
Covid-19
prompts China
lockdown
China starts
to re-open
amid RoW
mine
shutdowns
China
indicators
positive.
RoW
lockdown
eased
4500
4750
5000
5250
5500
5750
6000
6250
6500
6750
Ja
n-1
9
Fe
b-1
9
Ma
r-19
Apr-
19
Ma
y-1
9
Ju
n-1
9
Ju
l-1
9
Aug
-19
Sep
-19
Oct-
19
No
v-1
9
De
c-1
9
Ja
n-2
0
Fe
b-2
0
Ma
r-20
Apr-
20
Ma
y-2
0
Ju
n-2
0
4
Stocks increased in Q1 but destocking underway in Q2
Chinese cathode import premiums, $/t
DATA : CRU, LME. www.crugroup.com
-300
-200
-100
0
100
200
300
400
Jan
Feb
Ma
r
Apr
Ma
y
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2020
2019
2018
11y med.
Cumulative growth/decline in bonded, LME, SHFE &
Comex stocks by selected years, '000t
20
40
60
80
100
120
Oct-
18
De
c-1
8
Fe
b-1
9
Apr-
19
Ju
n-1
9
Aug
-19
Oct-
19
De
c-1
9
Fe
b-2
0
Apr-
20
Ju
n-2
0
ER Cathode SXEW Cathode
Demand hit hard by Covid-19 but China recovery stronger than expected
5
-17.9%
-12.1%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021
China
Rest of World
RoW Annual average
China Annual average
-6.0%
-2.0%
Refined copper consumption, China vs Rest of World, quarterly y/y % change
+3.7%
+5.2%
+1.0%
-2.3%
www.crugroup.comDATA : CRU.
6
17,000
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,000
26,000
27,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Global refined copper consumption, ‘000t
Jan-20 May-20
-1.4 Mt
Significant downgrade to global consumption
2019:
Global copper demand was weak in 2019 (-0.7%)…
…due to the slowdown in global trade & manufacturing…
…main impact felt in developed world (-4.5%)
2020:
Covid-19 downgrade copper consumption in 2020 (-4.0%)
Global refined copper consumption expected to be 1.4 Mt
lower in 2020 than we forecast pre-Covid-19…
…and 0.8 Mt lower in 2024
2021:
Global recovery in demand expected in 2021 (+4.4%)…
…but no bounce back to previous forecast levels
World copper demand has transitioned onto a lower path
DATA : CRU. www.crugroup.com
All major consuming regions to experience a downturn in 2020
7
-10.0%
-5.0%
0.0%
5.0%
10.0%
2018 2019 2020 2021 2022 2023 2024
European refined copper consumption, % change
-10.0%
-5.0%
0.0%
5.0%
10.0%
2018 2019 2020 2021 2022 2023 2024
North American refined copper consumption*, % change
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
2018 2019 2020 2021 2022 2023 2024
Indian refined copper consumption, % change
DATA : CRU, industry sources. NOTE: (1) Including USA, Canada and Mexico
-10.0%
-5.0%
0.0%
5.0%
10.0%
2018 2019 2020 2021 2022 2023 2024
ASEAN
NE Asia
ASEAN and NE Asian refined copper consumption, % change
www.crugroup.com
Disruptions keep increasing in Latin America
DATA: CRU, Company announcements. 8
-434
-198
-159
-450
-350
-250
-150
-50
Mine disruptions Smelter disruptions Mine cutbacks
Cumulative impact of announced Covid-19 disruptions and
price-related cutbacks, ' 000 t
Antamina
Cerro Verde
Las Bambas
Constancia
Buenavista
La Caridad
Voisey's Bay
Cobre Panama
MiradorSossego
Salobo
Toromocho
Various
Various
Various Various Various
VariousVarious
Potential disruptions
-220
-200
-180
-160
-140
-120
-100
-80
-60
-40
-20
0
Announced and potential mine disruptions due to
Covid-19, '000 t Cu
www.crugroup.com
Further price-related cutbacks less likely as Chinese demand recovers
DATA: CRU, Company announcements. 9
Current disruptions,
434
Potential disruptions,
125
Productivity H2, 150
Announced cutback,
159
Potential cutbacks, 41
0 200 400 600
2020Covid-19
disruptions
2020cutbacks
Covid-19 mine disruption and price-related cutbacks,
'000 t
www.crugroup.com
-2,000
0
2,000
4,000
6,000
8,000
0 4,000 8,000 12,000 16,000 20,000
2020 CRU Cash Costs net of by-product credits $/t Cu
Cumulative copper production, '000 tonnes
90th percentile = $5,115 /t
75th percentile = $3,819 /t
Capex reduced due to disruptions, exchange rates and weak market
10DATA : CRU, industry sources.
0%
5%
10%
15%
20%
25%
30%
35%
0
1
2
3
4
5
6
7
Previous Current Reduction
Capital expenditure guidance for 2020, $ bn
20
20
20
21
20
22
20
23
0
100
200
300
400
Committed projects 2020-2024; '000 t capacity
www.crugroup.com
Prices consistently below $6,000 /t could impact project development
DATA: CRU, Company announcements. Note: *Company board approval. 11
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2009 2011 2013 2015 2017 2019
LME 3M copper price, project approval*; $/t
Spence
$6496
OT u/g
$4794
Quellaveco
$6290
QB2
$6278
El Teniente
NML $7160
Mirador
$4702
Carrapateena
$6336
Toromocho
$6940
Los
Pelambres
$6175OT
$6061
Yulong
$6099
Mina
Justa
$5864
The 2011 – 2016 downturn saw very few major copper projects approved
and a sharp decline in sector investment, including exploration and M&A
20
21
20
22
20
23
20
24
20
25
0
25
50
75
100
125
150
175
200
Probable Possible
Uncommitted projects 2020-2025; '000 t capacity
www.crugroup.com
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What’s happened to copper projects?
0.0
0.5
1.0
1.5
2.0
2.5
3.0
20 21 22 23 24
Brownfield Greenfield
Committed project supply forecast, Mt
Share of total
production
0%
6%
12%
-47
-251-232
-223
-122
-300
-250
-200
-150
-100
-50
0
20 21 22 23 24
Brownfield (-3M) Greenfield (-6M)
Impact of 3-6 month delay to committed projects, '000t
2029
2029
2022
2025
2026
2026
2026
2027
2027
2027
2028
2028
2029
2029
2029
2030
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0
50
100
150
200
250
300
Probable Possible Incentive Price (2019 c/lb)
Probable & Possible copper projects with capacity of >150,000t/y; ’000t of capacity
375 500
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
20 21 22 23 24 25 26 27 28 29 30
Probable Possible Speculative
Uncommitted project supply forecast, Mt
Share of total
production
2%
14%
7%
0%
-111
-231
-171
-241
-300
-445-491
-542
-700
-600
-500
-400
-300
-200
-100
0
20-23 24 25 26 27 28 29 30
Probable (-6M)
Possible (-12M)
Speculative (-24M)
Impact of 6-24 month delay on forecast, '000t
2020
2020
2020
2021
2021
2021
2021
2021
2021
2021
2022
2022
2022
2022
2023
2023
2023
2023
0.0
1.0
2.0
3.0
4.0
0
50
100
150
200
Expansions & Extensions Projects Incentive Price (2019 c/lb)
Committed copper projects with capacity of >50,000t/y; ’000t of capacity
247 311 233 435410
Mine production growth slowing over the medium-term
13DATA : CRU, industry sources.
2.9%
-0.4%
-4.5%
5.2%
2.8%
2.7%
0.4%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2018 2019 2020 2021 2022 2023 2024
Mine production growth y-on-y; %
-1000
-500
0
500
1000
1500
2000
2019 2020 2021 2022 2023 2024
Concentrates SXEW
Cumulative new mine production from 2019; ‘000 t
www.crugroup.com
Excess smelter capacity to keep concentrates market tight
14DATA : CRU
107/10.7
97/9.7
93/9.3
82/8.2
81/8.1
62/6.2
61/6.1
65/6.5
73/7.3
78/7.8
60
70
80
90
100
110
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Feb-20 May-20
Annual benchmark TC/RC and forecast; $/t and ¢/lb
-600
-500
-400
-300
-200
-100
0
100
200
2017 2018 2019 2020 2021 2022 2023 2024
Copper concentrates balance; ‘000 t
www.crugroup.com
Smelter projects will be under increased scrutiny
15DATA : CRU, industry sources.
2020
2021
2022
2023
2024
0 100 200 300 400
Tsumeb
Chifeng Jinjian ph 1
Wuxin Copper Exp.
Zijin Copper Exp
Tuticorin Restart
Ronnskar Expansion
Daye Expansion
Guorun Copper II
Xinhui Copper
Houma new furnace
Kansanshi Exp.
Nanguo Phase 2
Almalyk Exp.
Sumbawa
SmeltCo
Chifeng Jinjian Ph 2
Gresik
Committed Probable Possible
Smelter projects (capacity >= 100,000 t/y); ‘000 t capacity
3.2%
1.5%
-2.0%
5.0%
3.7%
1.1%
2.6%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2018 2019 2020 2021 2022 2023 2024
Potential blister production growth y-on-y; %
www.crugroup.com
Market plunged into surplus; modest cutbacks have been implemented
16
-111
216
54
-39
-243
-53
402
184 173118
26
75
30
-300
0
300
600
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Adjusted balance Price related cutbacks
Refined copper market balance, ‘000t
DATA : CRU. www.crugroup.com
Prices weighed by surplus outlook
17DATA : CRU.www.crugroup.com
$6,542
$6,017
5,313 5,247
$5,600
$6,100
$6,600
$6,017$6,103
$6,300
$6,475
$6,750
$7,150
4,600
5,300
6,000
6,700
7,400
2018 2019 2020 2021 2022 2023 2024
Current forecast January 2020
$/t LME 3M price
Key conclusions:
18www.crugroup.com
Global refined copper demand is set to decline by 4.0% in 2020; the steepest downturn since the 1980s
Chinese demand recovering more rapidly than expected; easing of government lockdowns in RoW improved sentiment
Covid-19-related mine disruptions keep increasing but significantly lower than impact on demand. Further price-related
cutbacks less likely as Chinese demand recovers, supporting copper prices
Mine project development affected by disruptions, capex reductions, weak market and uncertainty
Concentrates market to remain tight despite slowdown in smelter project development
Refined copper market balances are forecast to show persistent surpluses in the short to medium term
Due to the expected oversupply, the copper price will hover around $5,300 /t in 2020/21… capped by the 90th percentile of
the net of by-products cash cost curve; the equilibrium price in a surplus market
In 2022/24, the anchor for prices will shift towards the 90th percentile of the all-in-sustaining capital costs (AISC) curve…
resulting in a price of $6,600 /t in 2024, which is less than is required to incentivise new mine capacity
DATA : CRU
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