The center of gravity of copper price will move downward in 2023

1、 Trend analysis


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According to the data monitoring of the business community, in 2022, the copper price will rise first, then fall, and then rise to the bottom, going out of the deep “V” trend. The copper price at the beginning of the year was 69930 yuan/ton, and at the end of the year it dropped to 66196.67 yuan/ton, a decline of 5.34%.


As shown in the figure above, from the current copper futures comparison chart of the business community, the current copper futures trend in 2022 is basically the same, and the spot price is higher than the futures price most of the time. At the end of the year, the main basis difference has risen, indicating that everyone is not very optimistic about the future price of copper.


2、 Market analysis


Looking at the trend of copper throughout the year, the whole year is divided into three stages. From January to June, it fluctuated and rose, from June to mid July, it fell sharply, and from mid July to the end of the year, it rebounded.


From January to June and March, the conflict between Russia and Ukraine broke out, which greatly impacted the global supply chain. Copper supply was in short supply, global inflation began to intensify, and copper prices continued to rise sharply. Subsequently, the macro environment changed greatly. The Federal Reserve continued to raise interest rates strongly, and inflation in Europe and the United States remained high. In particular, the consumer price index (CPI) in the United States reached a peak of 9.1% year-on-year in June, and copper prices began to fall sharply. In July, the expectation of the Federal Reserve to raise interest rates slowed down, crude oil and natural gas prices continued to decline, and inflationary pressures were released. At the same time, the production and sales of new energy vehicles increased dramatically, copper demand was released, and copper prices rebounded from the bottom.


Upstream supply:


2022 and 2023 are the big years for the release of new copper mine output. In the first nine months of 2022, the release of new capacity will boost the global copper mine output by about 3.5%. In terms of new output, Indonesia’s output increased by 33%, mainly due to the increase of underground production of Grasberg Project; The output of DRC increased by 28%, mainly due to the continuous ramp up of Kamoa production capacity and the release of capacity of other projects. Influenced by the epidemic situation, weather and community problems, the supply in South America was less than expected. Chile, a major copper producer in the world, was affected by the COVID-19, operational problems, grade decline and drought. In the first nine months of 2022, copper production declined by 6.7%, and concentrate production declined by 9%; In Peru, two major copper mines were shut down due to community problems. In the first nine months of 2022, the copper production in Chile only increased by 1.4%, but the output decreased by 5% compared with the same period in 2019 (before the epidemic). According to the World Bureau of Metals Statistics (WBMS), from January to September 2022, the global mine copper output will be 16 million tons, an increase of 1.2% over the same period last year.


Downstream demand:


Domestic copper terminal consumption is mainly concentrated in power cable, household appliances, automobiles, real estate and other industries. Among them, power cables account for nearly 37%, buildings account for 21%, household appliances (air-conditioning and other refrigeration equipment) account for 15%, and the automobile industry accounts for 8%.


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Automobile production: It is shown that the retail sales of passenger car market in January November totaled 18.367 million units, a year-on-year increase of 1.8%, and a year-on-year net increase of 317000 units, of which, since the launch of the preferential policy of halving vehicle purchase tax, 1.39 million units have increased year-on-year from June to November, making a huge incremental contribution.


Household appliances: From January to October 2022, the cumulative output of household air conditioners was 125.95 million units, a year-on-year decrease of 3.5%. In October, the output of air conditioners was 144.32 million units, a year-on-year decrease of 3.3%. In October, the number of household refrigerators was 6.9 million, down 9.7% year on year.


Power cable: By October 2022, the accumulative value of completed investment in power grid infrastructure will be 351.1 billion yuan, up 3% year on year. The completed investment in national power infrastructure was 460.7 billion yuan, up 27% year on year. According to the 14th Five Year Plan, the State Grid plans to promote the transformation and upgrading of power grids and vigorously develop new energy industries; With the rapid launch of photovoltaic power generation, onshore wind power and offshore wind power projects, the future power grid will play a certain role in boosting copper demand.


Real estate: According to the National Bureau of Statistics, from January to November 2022, the national investment in real estate development decreased by 9.8%. From January to November, the national real estate development investment was 12386.3 billion yuan, down 9.8% year on year; Among them, the residential investment was 9401.6 billion yuan, down 9.2%. From January to November, the construction area of real estate development enterprises was 8968570000 square meters, down 6.5% year on year. Among them, the residential construction area was 6339.16 million square meters, down 6.7%. The newly started housing area was 1116.32 million square meters, down 38.9%. Among them, the newly started residential area was 817.34 million square meters, down 39.5%. The completed housing area was 557.09 million square meters, down 19.0%. Among them, the completed residential area was 404.42 million square meters, down 18.4%.


In general, the traditional demand for real estate and household appliances will remain sluggish in 2022, and the green demand for wire and cable and new energy vehicles will be relatively stable. In 2023, according to the 14th Five Year Plan, the State Grid plans to promote the transformation and upgrading of power grids and vigorously develop the new energy industry; With the rapid launch of photovoltaic power generation, onshore wind power and offshore wind power projects, the future power grid will play a certain role in boosting copper demand. With the recovery and stabilization of the real estate industry, the overall demand for air conditioners and refrigerators in 2023 will increase compared with that in 2022.


According to the annual comparison chart of copper prices of the business community, copper prices and trends this year are similar to those in 2022. The annual price exceeds 60,000 yuan/ton, and the annual average price is about 70,000 yuan/ton. Except for 2011, copper prices in other years are generally lower than 60,000 yuan/ton.


In 2023, the global copper supply and demand will increase, or the global copper stock will increase by 200000 metal tons. However, since the current copper stock is at a very low level in history, even if the stock will increase next year, the total global copper stock will still be at a low level. Consumer inflation is still at a high level, which will keep the interest rates of the Federal Reserve and the European Central Bank high in 2023. Economic growth in Europe and the United States will slow down and even recession expectations will increase, leading to a decline in overseas demand expectations or partially hedging the optimistic demand expectations formed by the release of domestic COVID-19 prevention and control. If the inventory is low, it is estimated that the copper price in 2023 will be equivalent to that in 2022, and the copper price will be in the range of 50000-71000 yuan/ton.

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