As 2024 comes to an end, numerous macro and fundamental events have disrupted the copper market, causing copper prices to jump initially and then pull back, even breaking historical highs at one point.
Against the backdrop of tight copper raw materials, geopolitical tensions, the gradual initiation of interest rate cuts in Europe and the US, and the opening of domestic policy space, there are factors supporting copper prices. However, despite high copper prices, social inventory reduction has been unsatisfactory, and fundamental consumption has been disappointing. Actual consumption of copper cathode this year is unlikely to increase.
Frequent mine accidents and the accelerated expansion of global smelting capacity have led to a copper ore shortage in 2024, which is expected to widen in 2025
Since the end of 2023, as copper cathode smelters gradually started production, the narrative of copper ore shortage has been priced in. However, from the end of 2023 to early 2024, amid global macro sentiment uncertainty and weak fundamental consumption, copper prices did not experience significant volatility. On March 13, Chinese smelters held a meeting in Beijing, where information about production cuts was shared, leading to market speculation and a strong push by bulls to raise copper prices.
Although copper prices did not continue to trade on the copper ore shortage logic, the global copper ore shortage is expected to be 212,000 mt (metal content) in 2024 and 822,000 mt (metal content) in 2025. The tightness of copper ore remains the main reason for the floor under copper prices this year.
Smelters did not significantly cut production in 2024, and with a substantial increase in exports, the apparent growth rate for the year still exceeded 2%
Large smelters in 2024 had long-term contract guarantees for raw materials, and the proportion of copper scrap in smelting increased, ensuring stable refined production. After July, copper scrap policies significantly impacted shipments, and the tightness of blister copper and copper anode led some smelters to reduce production. However, from a cumulative production perspective, SMM expects China's smelter production in 2024 to be 11.95 million mt, an increase of 510,000 mt from 2023.
SMM expects copper cathode imports in 2024 to be 3.5 million mt, roughly the same as 2023's 3.51 million mt; exports, however, are expected to increase significantly to 490,000 mt, up 210,000 mt from 2023. Meanwhile, consumption growth is limited, and 2024 is expected to see an inventory build-up of 200,000 mt of copper cathode, resulting in an actual consumption of 14.76 million mt.
Traditional consumption is still dragged down by real estate, while new energy and home appliances drive growth
In traditional consumption, real estate continues to drag down end-use copper consumption, while wind power, PV & NEV and home appliances, despite a downward trend in unit consumption, still drive industry copper consumption with high production. The power grid steadily increases its efforts, achieving steady growth in copper consumption at the power port. SMM expects end-use copper consumption in 2024 to be 15.76 million mt.
