Swapping aluminum for copper will maintain China’s resources, group says
China depends on overseas imports for 60% of its aluminum resources as opposed to 70% of its copper resources.
Solid copper mine production from new or expanded operations is expected to push the market into surplus next year, before growth slows down in the second half of the decade.
Higher mining output plus additional supply from a stockpile in Congo could further weigh on prices, which are already seeing pressure from weak demand and signs of a slowing global economy.
Benchmark prices hit their lowest since Jan. 6 this week.
Macquarie currently expects 2023 global copper mine supply to increase by 2.8%, or around 600,000 tones, due to project ramp-ups and higher output at some existing operations.
JP Morgan sees global copper mine production rising by 2.6% in 2023, inclusive of a 5.5% disruption allowance, which is higher than usual this year due to social unrest in Peru. Analysts typically factor in loss of production from disruptions at 5% of total mined copper supplies.
The growth is driven by two projects: Quebrada Blanca in Chile and Quellaveco in Peru, with some others approaching completion after delays caused by the pandemic.
Additional supply will push the copper market into a surplus of 298,000 tonnes in 2024 after a deficit of 114,000 tonnes in 2023, the International Copper Study Group (ICSG) said on Friday.
Another source of supply is from a large amount of copper stored at Congo’s Tenke Fungurume mine (TFM), which was not exporting the metal for eight months due to a dispute between its shareholders.
After the dispute was resolved earlier this month, TFM, which produces up to 20,000 tonnes of copper per month, is likely to ship the stored metal to China over the coming months, broker Marex said.
Mine production growth is expected to slow down after 2025.
“After a period of solid mine supply growth in the nearer term, we project a major slowing of supply growth in the second half of the decade,” Citi said.
Copper demand from China was expected to surge in early 2023 when the world’s leading metals consumer removed its strict Covid curbs, but growth has so far failed to meet initial expectations, pushing prices down.
(By Polina Devitt; Editing by Tomasz Janowski)
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