SMM: It is expected that copper prices will rise more easily and fall more easily in the future, and the volatility of aluminum prices may not be as high as copper
On December 4, at the IEMC 2024SMM (4th) Motor Annual Conference and Industrial Chain Expo-Main Forum hosted by the National Precision Micro Motor Engineering Technology Research Center, Shanghai Nonferrous Network Information Technology Co., Ltd., Ningbo Zhaobao Magnetics Co., Ltd., and Zhejiang Electric Drive Innovation Center, SMM Industry Research Department GM Ye Jianhua shared the price and market analysis of motor raw materials-copper and aluminum metals.
It introduced the manufacturing PMI of major economies in the world in recent years, the US CPI data, the trend of the London copper and US dollar index, and the copper-gold ratio. Exports have become an important engine to drive my country's economy. It elaborated from the perspectives of China's real estate development investment, China's total export value (in US dollars), China's CPI, China's export growth rate 3 months moving average year-on-year, South Korea's export growth rate 3 months moving average year-on-year, Vietnam's export growth rate 3 months moving average year-on-year. The effect of incremental policies has begun to emerge. M1 and M2 both rose in October. In October, the growth rates of M1 and M2 both rose. The effects of a series of incremental policies have begun to emerge, consumer confidence has improved, and the economy is expected to improve steadily. Under the high base, government debt financing increased less year-on-year, and the growth rate of social financing declined in October. Resident loans benefited from the National Day holiday and the reduction in existing mortgage interest rates to reduce early repayments, achieving a certain recovery.
The TC of spot copper concentrate of Chinese smelters has turned negative, the profit of purchasing spot copper concentrate for smelting has deteriorated seriously, and the risk of decline in the operating rate of Chinese smelters has been expected to increase. It analyzes the spot TC of copper concentrate, crude copper processing fee, the profit and loss balance of imported copper concentrate for copper smelting, and the estimated inventory of available copper concentrate of Chinese copper smelters. The increase of major global copper concentrate mainly comes from expansion projects. The increase of global copper mines will decline year by year in the next few years. In the future, the increase of global copper concentrate mainly comes from existing copper mine expansion projects. The number of new projects put into production of world-class copper mines is not only limited, but also difficult to drive the increase of copper concentrate; large-scale copper mine projects available for development are no longer seen in the world. The concentrated launch of global crude refining capacity has greatly aggravated the tense situation of copper concentrate. In 2025, some smelters will have "no rice to cook". It mentioned: the growth rate of global copper concentrate supply is gradually declining, and China's smelting capacity is facing challenges. Next year is a battle for the survival of copper plants; recycled copper raw materials have a huge impact on the industrial balance sheet, and the proportion of smelting in the future may be further raised. The copper concentrate shortage cycle is coming. Global smelters are entering a cold winter period. The long-term contract TC is US$88/ton in 2023, US$80/ton in 2024, and the long-term contract has fallen to a low of US$20 in mid-2024.
Its introduction: Domestic scrap copper supply: from January to October 2024, it fell by 7.4% year-on-year; scrap copper imports: from January to October 2024, it increased by 15.9% year-on-year. By 2030, China's total scrap copper supply may reach nearly 5 million tons of metal. Domestic supply will become the main contributor, providing a certain raw material guarantee for electrolytic copper production. It analyzed from the acceleration of China's scrap copper supply, SMM China's electrolytic copper production, and SAVANT Copper Global Dispersion Index. Hot spot: Alumina and electricity costs increase together. The real-time full cost of electrolytic aluminum exceeds 21,000 yuan/ton. ►SMM calculated based on the weekly average price of raw materials such as alumina and the weekly average price of SMM A00 this week. According to the full cost calculation, there are 27.66 million tons of electrolytic aluminum production capacity in production at a loss, accounting for 63.41% of the total domestic operating capacity; according to the cash cost calculation, there are 9.16 million tons of electrolytic aluminum production capacity in production at a loss, accounting for 21% of the total domestic operating capacity.
According to the latest data from the General Administration of Customs: In October 2024, the national export volume of unwrought aluminum and aluminum products was 577,000 tons, an increase of 2.7% month-on-month and 31.1% year-on-year; the cumulative export volume from January to October reached 5.49 million tons, a cumulative year-on-year increase of 16.9%.
►In the fourth quarter, overseas aluminum terminals routinely stocked up, and it is expected that subsequent aluminum exports will maintain a slight increase month-on-month. It is still necessary to pay attention to the changes in overseas aluminum tariffs. The accumulation of electrolytic copper in China exceeded expectations, and the near-term SHFE copper contract maintained a weak Back structure. It analyzed the reasons for the unexpected accumulation of domestic electrolytic copper inventories from the total domestic social inventory, SHFE copper contracts one-two consecutive, total social inventory (including bonded), SMM1# electrolytic copper premiums and discounts, etc., including price suppression, the return of scrap copper, and large import arrivals. In the short term, the destocking of domestic aluminum ingots has come to an abrupt halt. Pay attention to the impact of the increase in the proportion of aluminum liquid and the cancellation of tax rebates on the consumer side.
►In November, although the domestic aluminum ingots continued the sharp destocking performance since the "Golden September and Silver October" in the first week, the outbound volume of mainstream consumption areas has shown a downward trend. Since November, the outbound volume of domestic aluminum ingots has shown a "two consecutive declines", with a cumulative decrease of about 10,000 tons from late October to 112,100 tons. At the same time, due to the improvement of railway transportation in Xinjiang in early November compared with the end of October, various platforms began to batch cars one after another, and the in-transit goods shipped to Gongyi, Wuxi and other places increased significantly month-on-month. It is expected that the arrival of goods in mid-November will bring certain pressure to inventory. ►As of November 11, 2024, SMM statistics show that the social inventory of domestic electrolytic aluminum ingots is 576,000 tons, and the domestic tradable electrolytic aluminum inventory is 450,000 tons, which is 13,000 tons more than the inventory last Thursday. The inflection point of short-term inventory has already been formed. Year-on-year, although the current domestic aluminum ingot inventory is still at a low level in the same period of the past five years, the difference from the same period last year has narrowed slightly to 112,000 tons, and is the same as the inventory in the same period of 2022. SMM believes that although Xinjiang's shipping situation has been repeated, with the off-season and the inhibitory effect of high aluminum prices on the outbound volume, it is expected that domestic aluminum ingot inventory may be difficult to maintain the current advantageous position, and the supporting role for the performance of futures and spot prices may be weakened.
With high copper prices, the power system has become very sensitive to copper prices. It elaborated in detail on the investment in power grid infrastructure, power source infrastructure, aluminum delivery and copper delivery. Consumption-driven: The power supply, transmission and energy storage ends simultaneously boost aluminum consumption Transmission + energy storage: On the transmission end, with the construction demand of the State Grid, the output of aluminum cables has steadily increased. According to SMM's calculations, the output of aluminum cables will reach 3.6 million tons in 2023, with an aluminum consumption of 2.88 million tons; it is expected that the output of aluminum cables will reach 3.82 million tons in 2024, with an aluminum consumption of 3.06 million tons. Energy storage end.
In addition, the amount of aluminum used in some super charging piles on the market has reached 40kg, but for cost considerations, steel is still the dominant metal material for charging piles. The medium- and long-term pressure on copper and aluminum consumption by real estate is still there. The short-term sluggish consumption on the real estate end is difficult to improve, and the market is still dominated by digesting inventory. The power of new houses is limited.
We look forward to the policy end in the fourth quarter. In the short term, domestic construction is in the middle of the recovery season, and the long-term pressure on copper and aluminum consumption remains unabated. In 2024, home appliances will continue to increase copper and aluminum consumption. In mid-to-late October, as the main engine factories increased production, the order performance exceeded expectations.
The policy of replacing old appliances with new ones has significantly promoted the market, and air-conditioning companies have actively arranged production. In addition, favorable real estate policies have been frequently issued this year. Some companies have expressed their expectation that the real estate market will pick up and the household copper pipe track will heat up. In November, domestic and foreign sales will be strengthened simultaneously, and it is expected to continue to drive the copper pipe industry's operating rate to rise in November. In addition, Trump won the election, and there are orders in advance overseas. Considering the overseas Christmas holiday in December, domestic export orders may increase further in November.
New energy is one of the core driving forces for the growth of global copper and aluminum consumption. It is explained from the aspects of China's photovoltaic installed capacity from 2018 to 2024, China's new energy vehicle production from 2018 to 2024, China's cumulative wind power generation from 2019 to 2024, and the development trend of global new energy copper consumption.
►Take automobiles as an example Among aluminum materials and aluminum parts used in all-aluminum automobiles, by mass, the proportion is usually 50% for flat-rolled materials, 20% for extruded materials, 27% for castings and die-castings, and 3% for forgings.
In addition, new energy vehicles promote the development of derivative demand-charging piles.
At present, the amount of aluminum used in some super charging piles on the market has reached 40kg, but for cost considerations, the metal materials used for charging piles are still dominated by steel. Consumption-driven: The amount of aluminum used in new energy continues to increase Among the terminal consumption of aluminum, the total consumption of the construction, transportation and electronics industries accounts for nearly 70%. Among them, in 2022, the domestic construction aluminum was affected by the weakness of real estate, and the year-on-year decline was relatively obvious. However, with the promotion of tough policies such as domestic guaranteed delivery of buildings in 2023, the domestic construction aluminum still supports domestic aluminum consumption, and the annual construction aluminum is expected to increase by 1.5% year-on-year.
However, in 2024, due to the obvious decline in the newly opened area of real estate in the early stage, it is expected that there will be no growth expectations for construction aluminum in the next few years. 2024 is the year when domestic aluminum consumption will continue to tilt toward the new energy industry. The global photovoltaic installation growth expectations and the penetration rate of new energy vehicles are increasing year by year, which will drive the year-on-year growth expectations of aluminum applications in transportation and electricity. The new energy field is the main engine driving the growth of copper consumption in the future. We need to be vigilant about unit consumption and growth rate that are lower than expected. It discusses from the perspectives of China's copper terminal consumption share and the estimated growth rate of copper consumption at various terminals in China in 2024.
Global electrolytic copper supply and demand balance: In the medium and long term, the problem of copper supply and demand is inevitable. Combining the global refined copper production, global refined copper consumption, adjusted supply and demand balance, and global visible inventory data, the outlook for copper prices, considering the steady growth of demand ports such as Southeast Asia in the past two years, the growth of demand in South America, and the expected growth of demand in North America, SMM expects that the copper demand port will maintain a year-on-year growth trend. Considering the bottleneck problem of the supply port, next year will be a year of no shortage of electrolytic copper but a shortage of copper ore, and the shortage of ore will sooner or later be transmitted to the electrolytic copper port, so in the long run, the center of gravity of copper prices is expected to move up. Constrained by the production capacity ceiling, the growth rate of domestic electrolytic aluminum supply slowed down, and the growth rate of overseas electrolytic aluminum increased.
►In 2025, the domestic supply side gradually approached the ceiling in 2025, and the output growth rate narrowed to around 2%. At the same time, the development of domestic new energy and other aspects will continue to promote the consumption of primary aluminum, but the use of aluminum in the traditional construction sector is still expected to decline. SMM expects that the annual aluminum consumption in 2025 will increase by about 1.3%. In addition, SMM expects that the domestic electrolytic aluminum supply and demand will maintain a small gap next year, but the pressure from the new production capacity in Southeast Asia is still there, and China's foreign aluminum may have a small surplus. In 2025, the global supply and demand balance will maintain a small surplus pattern, and we need to be vigilant about the stimulus brought by global policy adjustments on carbon emissions in the electrolytic aluminum industry.
In summary, for the future of copper and aluminum, considering that the capital market has expectations of favorable advance trading, the futures market will also respond to the expectations of future macro fundamentals in advance, so the prices of copper and aluminum may complete the expected future trend in advance. On the macro level, many countries such as Europe and the United States are cutting interest rates, and the global monetary environment is relatively loose. 2025 is the final year of China's "14th Five-Year Plan", and the market has high expectations for the space for China's fiscal and monetary policies next year.
On the demand side, the demand for copper and aluminum in the new energy field still maintains positive growth. In addition to Europe, copper consumption in China, Southeast Asia, the United States and South America has maintained positive growth overall. If the demand in Europe is relatively smooth, the growth in other regions can still positively drive the consumption of global electrolytic copper. Under the fundamental support of tightening copper concentrate supply and growing demand, copper prices are easy to rise and difficult to fall. In the aluminum market, considering that the tight supply of bauxite may be alleviated next year, the marginal support effect of bauxite on aluminum prices may decline. It is expected that the volatility of aluminum prices in the future may not be as high as copper.
SMM: It is expected that copper prices will rise more easily than fall in the future, and the volatility of aluminum prices may not be as high as copper [SMM Motor Annual Meeting] https://news.smm.cn/news/103069543