The prosperity index is in the lower part of the "normal" range

    In July, the monthly prosperity index of China's copper industry continued to warm up, operating in the lower part of the "normal" range. The trend of monthly prosperity index of China's copper industry is shown in Figure 1.

Figure 1 trend of monthly prosperity index of China's Copper Industry

Figure 2 prosperity of China's Copper Industry        

    As can be seen from the monthly prosperity signal of China's Copper Industry (see Figure 2), in July, among the nine indicators constituting the monthly prosperity index of China's copper industry, eight indicators, such as LME copper settlement price, M2, import index, total investment, housing sales area, power cable, copper production index and main business income, were in the "normal" range; The total profit index is in the "cold" range.

    The first composite index rebounded

    In July, the leading composite index of China's copper industry was 87.2, up 0.6 points from the previous month (see Figure 3). Among the six indicators constituting the leading composite index of China's copper industry, 4 Rose and 2 fell (data after quarterly adjustment). Among them, the four indicators of year-on-year growth are m2, import index, total investment in copper industry and power cable, with year-on-year growth of 11.3%, 9.2%, 4.7% and 4.1% respectively; the two indicators of year-on-year decrease are LME copper settlement price and commercial housing sales area, with a year-on-year decrease of 15.3% and 6.8%.

China's copper industry composite chart 3

    Analysis of industrial operation situation

    First, the price rose strongly.

    In July, the average copper prices of LME in the current month and three months were 6354 US dollars / ton and 6349 US dollars / ton, respectively, up 10.7% and 10.2% month on month, and 7% and 6.6% respectively year-on-year. The average copper prices of SHFE in the current month and three months were 51211 yuan / ton and 50954 yuan / ton, respectively, up 8.8% and 10.1% month on month, and 9.1% and 8.9% respectively year-on-year.

Figure 4 copper price trend of SHFE and LME

    In July, the price of copper in the internal and external markets continued to rise. The copper price of the external plate ran high to US $6633 / T, and the copper price of the internal plate went up to 53520 yuan / T, showing that the performance of the internal plate was better than that of the external plate. In addition to the copper supply support affected by the overseas epidemic situation, the recovery of overseas market demand also played a certain role in promoting the upward trend of copper price. At the macro level, driven by the relevant economic stimulus policies, the market's overall expectation for economic performance in 2020 will be better, pushing the prices of nonferrous metals and other commodities to rise generally. Driven by this, copper prices are strong.

    Second, refined copper output increased year on year.

    In June, China's refined copper output was 860000 tons, up 3.5% year-on-year, and the output was basically the same as that of the previous month.

Figure 5 refined copper production in China

    The epidemic situation has been effectively controlled, the factors related to the capacity release of the copper smelting enterprises have been fundamentally improved, and the cumulative output of refined copper has continued to increase year-on-year. Among them, the output of mineral copper increased relatively fast year on year, driving the cumulative output of refined copper to increase year on year. As of June, China's mineral copper production was 3.813 million tons, up 7% year-on-year, and the growth rate was 1.8 percentage points higher than that of May. The copper refining output increased by 2.74% year-on-year, up by 482.9% compared with the same period in China. However, affected by the epidemic situation in major copper concentrate producing countries such as Chile and Peru, the global copper supply is tight, processing costs continue to decline, the raw material supply and profitability of copper smelting enterprises are squeezed, and the capacity release is limited. In June, the output of mineral copper was basically the same as that in May.

    Third, the supply of copper concentrate is tight, and processing costs continue to decline.

    In June, China's copper concentrate output was 154000 tons, up 13.6% year-on-year. The import volume of copper concentrate was 1.594 million tons, an increase of 8.9% year-on-year and a decrease of 5.8% on a month on month basis.

Figure 6 production and import of copper concentrate in China

    Affected by the resumption of China's copper mines and the commissioning of new and expanded projects, China's copper concentrate production has continued to recover, and the cumulative output has changed from negative to positive year-on-year. At the end of June, the cumulative output of copper concentrate in China was 803000 tons, a year-on-year increase of 8.4% from 8.2% in April.

    In terms of copper concentrate import, affected by the epidemic situation in the first quarter, copper smelting enterprises were generally faced with production restriction factors such as sulfuric acid expansion, transportation obstruction, limited supply of raw materials and auxiliary materials, and increase in refined copper inventory. The demand for raw materials was weakened, and the import of copper concentrate decreased rarely year on year. In the second quarter, driven by the recovery of copper smelting capacity utilization rate, the import demand of copper concentrate increased significantly, and the cumulative import volume increased year-on-year. In May, affected by the spread of epidemic situation in Peru, Chile and other countries, the global copper concentrate supply decreased, and the cumulative import volume of copper concentrate in China narrowed year-on-year growth. In June, China's copper concentrate imports fell month on month.

    Affected by the tight supply of copper concentrate, processing costs continued to decline. At the end of July, the spot TC quotation of copper concentrate was US $48 / T ~ US $52 / T, a decrease of US $1.5/t compared with the end of June, which was in the low level in recent years.

    Fourth, consumption continued to recover, and the performance of primary consumption was stronger than that of terminal consumption.

    In June, China's copper consumption continued to recover. The output of major copper consumer products continued to grow month on month. The cumulative output of primary consumer products, copper products and power cables increased year-on-year. For end consumer products, the cumulative output of automobiles and air conditioners continued to decrease year on year. The accumulated investment in real estate increased year on year.

Figure 7 copper output in China

    In June, China's copper output reached 1.877 million tons, up 6.1% year-on-year. The output of power cable is 4.801 million km, with a year-on-year increase of 10.3%. The cumulative output has changed from a year-on-year decrease to a year-on-year increase of 2.4%. The automobile output was 2.311 million, up 20.4% year-on-year, and the cumulative year-on-year decrease of the total output was 7.1 percentage points lower than that of May. The output of air conditioners was 24.903 million units, an increase of 12% over the same period of last year, and the cumulative decline rate of production was 6.7% lower than that of May. The accumulated investment in real estate has changed from negative to positive year-on-year, with a cumulative growth of 1.9% as of June.

    In terms of inventory data, the recovery of overseas consumer market lags behind that of China, and LME copper inventory continues to decline. At the end of July, LME copper inventory decreased by 88000 tons to 128000 tons compared with the end of June. Affected by copper consumption off-season and continuous growth of refined copper production, domestic inventory has entered the accumulation stage. At the end of July, SHFE copper inventory increased by 45000 tons to 159000 tons compared with the end of June.

    Fifth, the decline rate of recycled copper output was narrowed year on year.

    In June, China imported 69000 tons of copper scrap, down 60.1% year-on-year, and the import volume was the same as last month. Affected by the ban on foreign waste import, China's imports of copper waste and scrap materials continued to decline. As of June, China imported 431000 tons of copper scrap, a year-on-year decrease of 49.6%, an increase of 2.6 percentage points compared with that of May.

Figure 8 year on year growth of investment and output in terminal copper consumption

    Although the import of scrap copper continued to decline and the supply of recycled copper raw materials, the overall copper grade of imported copper scrap increased. In addition, recently, driven by the strong upward trend of copper price, the willingness of recycled copper suppliers to ship goods has increased; the increase of profit space has promoted the production of recycled copper smelting enterprises, and the output of recycled copper has increased month on month. As of June, China's output of recycled copper was 1.009 million tons, a year-on-year decrease of 3.6%, a decrease of 2.1 percentage points compared with that of May.

Figure 9 Import of scrap copper and output of recycled copper in China

    Sixth, the profitability of the industry continued to repair.

    In the first half of the year, the average price of LME copper for three months was US $5512 / T, down 10.7% year-on-year, while that of SHFE was 44630 yuan / T, down 7.4% year-on-year. Affected by the overall price decline, as of June, the copper mining and beneficiation realized a profit of 2.58 billion yuan, a year-on-year decrease of 6.9%.

Figure 10 profit realization of China's Copper Industry

    Driven by the recovery of operating rate of copper smelters and the recovery of downstream consumption, the profit reduction rate of copper smelting and calendering processing continued to narrow year-on-year. As of June, copper smelting realized a profit of 4.02 billion yuan, a year-on-year decrease of 37%, and a decrease of 21.7 percentage points compared with that of May. Copper calendering realized a profit of 4.31 billion yuan, a year-on-year decrease of 37.4%, a decrease of 6.6 percentage points compared with that of May.

    As far as the focus is concerned, the copper industry has recovered slightly, driven by the recovery of copper industry price. According to this trend, the copper industry prosperity index will still be in the bottom of the "normal" range for some time to come.