Everbright Securities released a research report saying that the copper industry is facing weak long-term capital expenditure growth and declining copper ore grades, and future supply increases will be limited; demand for new energy sources on the demand side will provide an increase, and traditional demand will grow slightly steadily.
The Zhitong Finance App learned that Everbright Securities released a research report saying that according to calculations, recent disruptions will reduce the new supply of copper mines by 200,000 tons in 2024, and the copper supply and demand gap may expand further. The copper industry is facing long-term weak capital expenditure growth and declining copper ore grade, and future supply increases are limited; demand for new energy demand on the demand side will increase, and traditional demand will grow slightly and steadily; the overall center of copper prices will gradually move upward in 2024-2025, which is optimistic about the stock price performance of listed companies in the copper industry. The recommended rankings are Luoyang Molybdenum Industry (603993.SH), Zijin Mining (601899.SH), Western Mining (601168.SH), and Jin Chengxin (). It is recommended to focus on Tongling Nonferrous Metals (000630.SZ) and Minmetals Resources (01208). 603979.SH
Incident: Copper production in Zambia, Chile, and Brazil has recently been disrupted by disruptions. Global copper production will be 22 million tons in 2023.
The main views of Everbright Securities are as follows:
In 2023, Zambia's copper production accounted for 3.5% of global production. Zambia is extremely rich in copper resources and is the second largest copper producer in Africa. In 2023, Zambia's copper production was 760,000 tons, accounting for 3.5% of global copper production.
Copper production will be affected by alternating power outages due to the drought in Zambia. Recently, Zambia is experiencing the worst drought in 20 years. Falling water levels have limited power generation. 85% of Zambia's electricity depends on hydroelectric power generation, and is currently facing the problem of alternating power outages caused by ongoing droughts. The Zambian National Power Company said the plan requires mining companies to cut electricity demand by up to one-fifth. The Zambian National Power Company has issued force majeure notices to some mines, which may put additional pressure on the tight copper market. If production stops in 2024 until the end of the year, copper production will be reduced by 107,000 tons.
Chile's old mines experienced production cuts due to declining grades, production accidents, and maintenance. Production declined after the accident at Chile's National Copper RadomiRotomic open pit mine. Only about one-third of the mine's truck fleet is in operation, and the mine will not return to normal until the first or second week of May. Also, Chile's National Copper's Chuquicamata underground mine began a 15-day planned overhaul on Monday. Chile's two national copper mines are expected to cut copper production by 43,000 tons.
A Brazilian district court has once again suspended the operating license for Vale's second-largest copper mine. On April 16, Vale and the Brazilian state of Pará said that a Brazilian district court once again suspended the operating license for the company's Sossego copper mine. Vale said the state won an appeal, reversing a previous court ruling to resume the mine's operating license. The company said it will take appropriate legal steps to try to reverse this decision. The Sossego copper mine produces 66,800 tons in 23 years, making it the second-largest copper mine produced in Vale. The license restoration period is unknown. If production is stopped in 2024 until the end of the year, copper production will be reduced by 48,000 tons.
Supply side disturbances are frequent, and the gap between supply and demand may widen further. According to the previous forecast of Everbright Securities, the global refined copper supply and demand gap (supply-demand) in 23-25 was -10/-39/ -640,000 tons, and the supply-demand gap accounted for -0.4%/-1.4%/-2.2% of demand. According to calculations, recent disruptions will reduce the new supply of copper mines by 200,000 tons in 2024, and the copper supply and demand gap may widen further.
Risk warning: There is a risk that mining companies' electricity consumption has been further reduced due to the drought in Zambia. There is a risk that copper supply growth will exceed expectations, and downstream demand will fall short of expectations.