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Focus on copper price surge

Relevant data shows that after entering 2023, the price of molybdenum, which is already on the rise, has soared again, hitting a new high in the past 17 years not long ago.It is reported that the recent rise in molybdenum prices may have been affected by limited overseas supply. The reasons include the decline in the production of foreign copper-molybdenum mines in the first quarter, the continued conflict between Russia and Ukraine, and the sudden stimulation of unrest in Peru.

Table of Contents

Molybdenum price soars

In addition to the rising price of the small metal molybdenum, the price of copper, a common metal, has also ushered in a sharp rise. It is worth mentioning that Peru is an important producer of molybdenum and copper in the world. The turmoil in the country is not only one of the driving forces behind the soaring price of molybdenum, but may also boost copper prices to new heights.

In the context of copper price changes, China Nonferrous Mining (01258.HK), which was once selected as the “Top 100 Hong Kong Stocks” list, has also attracted the attention of investors.

What is the impact of rising copper prices in China?

Cnmcl is an important listed company under the central enterprise China Nonferrous Metal Mining Group Co., Ltd., focusing on copper and cobalt metal mining, mineral processing, hydrometallurgy, pyrotechnics in Zambia and Congo (DRC). Legal smelting and sales business. Among them, sulfuric acid and liquid sulfur dioxide are by-products produced in the blister copper smelting process.

The company operates two segments. Among them, the wet process segment is mainly engaged in the production and sales of cathode copper and cobalt hydroxide, and the exploration and mining of copper oxide ore; the smelting segment is mainly engaged in the smelting of blister copper and anode copper, and the production of chemical products such as sulfuric acid and sulfur dioxide. 

In addition, China Nonferrous Mining is also engaged in copper product processing services, that is, enterprises outside China Nonferrous Mining entrust its pyrometallurgical smelters to process and produce copper products, and the company collects processing fees from these enterprises.

From the perspective of the copper industry chain, the upstream includes the raw ore of the mine and the copper concentrate obtained after mining; The obtained cathode copper (electrolytic copper); the downstream is processed copper wire, copper tube, copper rod, copper foil and other products.

From this point of view, China’s non-ferrous mining industry is actually involved in the upstream, middle and downstream of the industrial chain, but blister copper and anode copper contribute more than half of the revenue.

What is the impact of rising copper prices in China

The impact on the industrial chain

The rise in copper prices has different impacts on the upstream, midstream and downstream of the industrial chain. However, for China’s non-ferrous mining industry, with the increase in the self-sufficiency rate of copper mines, the rise in copper prices may have a certain positive effect on the whole.

In 2021, the company’s revenue will increase by 55.96% year-on-year to $4.051 billion, and net profit attributable to the parent company will increase by 185.78% year-on-year to $357 million.

China Nonferrous Mining said that due to multiple factors such as the rising demand for materials in the global new energy industry and the loose monetary policies and fiscal stimulus measures of the world’s major economies, the high international copper price also provides strong support for the company’s performance.

In addition, the company’s interim results for 2022 show that its revenue during the period was $2.207 billion, a year-on-year increase of 4.62%; net profit attributable to the parent was $196 million, a year-on-year decrease of 17.76%.

The impact on the industrial chain

In terms of business products, in the first half of the year, the company produced 165,042 tons of blister copper and anode copper, a year-on-year decrease of 4.3%; the cumulative production of cathode copper was 71,932 tons, a year-on-year increase of 22.8%; the cumulative production of cobalt containing cobalt hydroxide was 845 tons, a year-on-year increase of 682.4 %; accumulatively produced 522,409 tons of sulfuric acid, a year-on-year decrease of 0.6%; accumulatively produced 13,655 tons of liquid sulfur dioxide, a year-on-year increase of 14%; during the period, accumulatively processed copper products 36,602 tons, a year-on-year increase of 90.6%.

In addition, the research reports of relevant securities companies also pointed out that the copper mine self-sufficiency rate of China Nonferrous Mining Industry in the first half of 2022 will reach 29.9%, an increase of 1.76 percentage points year-on-year. The construction of the main ore body of Gambov will be completed in the third quarter of 2021 and put into trial production. In the first half of 2022, the production will reach the standard, and the production of cathode copper will be 14,700 tons. The self-sufficiency rate of cathode copper and copper mines reached 53.86%, an increase of 14.69 percentage points year-on-year.

China Nonferrous Mining said in its interim report that the year-on-year decline in performance during the period was mainly due to the year-on-year decline in the output of the Chambishi Southeast Ore Body under CNMC Africa Mining Co., Ltd. and the large fluctuations in international copper prices.

copper product

How will copper prices go next?

The researchers of related securities pointed out that the optimistic expectation of domestic demand recovery is pre-traded, and the short-term still needs to wait for the actual verification of consumption. Overseas metal inventories have generally declined, but domestic metals maintain seasonal accumulation, which may bring short-term correction pressure on prices.

The recovery of domestic demand within the year is still the main contradiction in the transaction. The long-term growth rate of copper and aluminum supply is low, and consumption continues to benefit from the new energy sector. We are optimistic about the industry’s prosperity and focus on low-energy-cost aluminum companies, downstream industry leaders and high-quality copper mining companies. 

The research report of another institution shows that overall, the increase in the supply side of copper mines will be considerable in the future, but there is still room for growth in demand, and the slow accumulation speed will support copper prices. The introduction of policies in the real estate industry and the release of liquidity by lowering reserve ratios are also positive for copper prices in the short term; however, in the context of global economic recession expectations and the Federal Reserve’s interest rate hike policy has not yet turned, copper prices still face certain downward pressure, and the overall shock situation is expected to continue. continued.

How will copper prices go next?

Researchers from related companies believe that the current high copper price above $9,000/ton is mainly driven by speculative bulls increasing their positions, and they have already priced in advance the expectation of a rebound in Chinese demand and the possibility of a recovery in European economic growth; from a fundamental point of view, copper Concentrate supply side risks continue but have not yet had an actual impact. Looking ahead, the fulfillment of the fundamentals on the demand side and the fading of the short-term risk of copper concentrate supply may be accompanied by the liquidation of speculative net long positions. 

There is also a certain amount of game space in whether the Fed’s follow-up policy will shift, and the downside risk of copper prices may be greater than the upside risk. Combined with the updated balance sheet and the analysis of copper prices relative to the cost line in previous reports, the average annual copper price in 2023 will increase from $7,000/ton to $7,800/ton, which is a 25% premium to the cash cost of copper mining level.

copper prices still face certain downward pressure

Conclusion

Although various institutions have some differences in their views on the subsequent trend of copper prices, they are not pessimistic overall. In addition, based on the copper price in recent years, after a rise, the current copper price is actually still at a relatively high level, which may still be a good position for China’s non-ferrous mining industry.


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