The Zhitong Finance App learned that SDIC Securities released a research report saying that Zambia is cutting electricity supply, and the China-Africa copper belt is facing a decrease in production. Copper mine production cuts continue to occur, and expectations for the resumption of production at the Cobre Panama and Sossego copper mines, which were cut off earlier, have been postponed again. The United Kingdom and the US sanctioned Russian metals and restricted Russian aluminum, copper and nickel transactions in LME and CME. Russian Copper accounts for 62.1% of LME inventory, which limits delivery or raises market concerns about the risk of overclosing positions. The supply-side logic continues to be implemented. We continue to be optimistic that the copper price will move further upward after the breakthrough, and we will continue to recommend the copper sector.
Recommended attention: Jin Chengxin (603979.SH), Western Mining (601168.SH), Luoyang Molybdenum (603993.SH), Zangge Mining (000408.SZ), Hegang Steel Resources (000923.SZ), Jiangxi Copper (), Tongling Nonferrous (000630.SZ), Yunnan Copper (000878.SZ), etc. 600362.SH
SDIC Securities views are as follows:
Electricity supply is being cut in Zambia. Production capacity in the Central African copper belt is expected to be affected by the drought and hydropower problems. Zambian mining companies may face cuts in electricity supply.
The Chamber of Mines of Zambia said that the Zambia National Electric Power Company (Zesco) has warned that electricity supply to some mining companies may be cut, and Zesco executives have indicated plans to require mining companies to cut demand by 1/5. Zambia accounts for more than 80% of the country's hydropower installed capacity. The El Niño phenomenon affected Zambia to enter a state of national disaster emergency due to a drought in February. It is estimated that the country's electricity gap may exceed 520 megawatts by the end of this year. Some Congolese gold companies rely on electricity imports from Zambia, and production capacity operations may also be affected.
Zambia and the Congo are the largest producers of copper in Africa. This power outage may affect global copper production by about 152,000 tons.
In 2023, global copper production was 22 million tons, of which Zambia produced 760,000 tons and Congo gold produced 2.5 million tons, accounting for 3.5% and 11.4%, respectively. Zambia has important copper mines such as Sentinel, Kansanshi, and Konkola, and Congo Gold has important copper mines such as Kamoa-Kakula, TFM, KFM, Dikulushi, and Lonshi. If the production of 1/5 of mining companies in Zambia is affected, it is estimated that 152,000 tons of copper production will be affected.
Disruptions continue due to the reduction and shutdown of the mine end, and the increase in copper concentrate production is facing a downturn
Sossego's discontinuation continues. In April, a Brazilian district court once again suspended the operating license for Vale's Sossego copper mine. If Sossego stops production for half a year, it is expected to affect copper production by 33,000 tons.
The prospects for Cobre Panama to resume production after local elections are bleak. In December 2023, the Panamanian president announced the closure of the mine following a Supreme Court ruling. If the company can renegotiate the new terms, it may re-open after the May election. Current poll results show that the prospects for First Quantum to reclaim the cancelled copper concession are bleak. Cobre Panama expects little hope of resuming production within the year, which will further affect copper production by about 200,000 tons.
The impact of the reduction in mining production in Chile continues. In April, a 15-day overhaul of Codelco's underground mine Chuquicamata began, which is expected to affect 10,000 tons of production. The Tomic copper mine, which was discontinued earlier, will not return to normal until early May. If it affects four-month production, it is expected to affect production of about 110,000 tons.
The increase in copper production in 24 was lowered to 226,000 tons (242,000 tons), taking into account recent production cuts and shutdowns.
The downgrades include the Cobre Panama copper mine, which is expected to stop production for the whole year (down 200,000 tons), Chile's Chuquicamata maintenance (down 10,000 tons), and revisions to other copper ore production (32,000 tons reduction). The 25-year increase was increased to 545,000 tons (up 150,000 tons). The increases include the resumption of production at the Cobre Panama copper mine in 25 years (+200,000 tons) and the renewal of production of other copper mines (50,000 tons down). In total, the reduction was 920,000 tons in 24-25. Based on this, and considering the impact of the current power outage in Africa (152,000 tons), the increase in copper deposits in 24 may further decrease to 74,000 tons.
The United Kingdom and the US sanctioned Russian metal trading, causing market concerns and risk of overtaking positions. Britain and the US sanctioned Russian metals and restricted Russian aluminum, copper, and nickel transactions in LME and CME.
According to the new regulations, the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME) are prohibited from using Russian aluminum, copper, and nickel produced on or after April 13, and Russian aluminum, copper, and nickel produced before April 13 are exempt from this regulation.
Russian Copper accounts for 62.1% of LME inventory, which limits delivery or raises market concerns about the risk of overclosing positions. Russian copper accounts for 62.1% of LME inventory. On April 12 to April 19, that is, after the United Kingdom and the US announced sanctions, the number of LME warehouse cancellations increased by 71.5% (+13,100 tons). During the same period, LME registered warehouse receipts fell by 14.5% (-15,400 tons). If cancelled warehouse receipts continue to rise, actual deliverable supply inventory will decline, which will cause market concerns about the risk of overloading positions, and copper prices may rise in stages.
Risk warning: demand fell short of expectations; copper prices fluctuated sharply; supply recovered beyond expectations.