China’s Thirst Unquenched
November 2018
Copper prices over the year have remained elevated with the refined copper market in a deficit of 283kt, 64kt higher than 2017. The deficit has widened as annual demand growth of 1.9% outpaces production growth of 1.7%. Demand growth has been kept positive in 2018 by China, who is reporting higher output in consumer durables.

According to the Chinese National Bureau of Statistics, China produced 141 million televisions in the first nine months of 2018, an increase of 18% year on year. As a result, copper prices are forecast to to increase in 2018, up from the 2017 average of US$6,173/t (US$2.80/lb). In 2019, Vedanta's 400ktpa Tuticorin smelter is expected to restart resulting in a small refined copper market surplus of 15kt.

The resolution of trade wars at the upcoming G20 summit provides the most significant upside potential for the copper price over the December Quarter.

Copper prices did not drastically move over the month. Prices have remained stable since around the 17–19th of September when MMG reduced 2018 guidance for its Las Bambas operation. The price averaged US$6,220/t in October, up by 2.8% from the September average. Exchange-held stocks continued to slide as downstream consumers look to stockpiles in a deficit market. At the end of October, exchange-held refined copper stocks totalled 429kt, 9% lower than the September close and 114kt lower than the end of 2017.

While China is forecast to produced 1.76Mt of copper in concentrate in 2018, an increase of 6.4% year on year, the country cannot seem to sate its thirst for copper concentrates. Over the first nine months of 2018, China imported 15.0Mt of copper concentrates, 20% higher than the corresponding period of 2017. The drive in imports is to feed Chinese smelters which are expected to produce 8.2Mt of copper anodes in 2018—a year-on-year rise of almost 630kt.

The influx of copper concentrate into China has, however, increased spot TCs from US$70–80/t in April to US$85–95/t in October. This is in part signalling higher-than-expected quantities of copper concentrate in the market as the 2018 benchmark was set at US$82.25/t by Tongling Nonferrous Metals and US-based miner Freeport-McMoRan. However, in 2019, smelting capacity is expected to grow, increasing the competition for concentrate, which is likely to result in lower treatment charges.