Recently, the global copper market is undergoing structural adjustments. The price of three-month copper futures on the London Metal Exchange (LME) has fluctuated sharply in the range of $9,000-$10,000 per ton. Structural contradictions between supply and demand, coupled with shifts in international policies, have jointly pushed the market into a new round of game cycles. The following is an analysis based on the latest data and industrial dynamics:
In the past 30 days, the price of LME three-month copper futures has shown a "rise and fall" trend: in mid-June, stimulated by the Peruvian copper mine strike, the price once exceeded $9,800 per ton, hitting a new high since November 2023; however, as expectations of the Federal Reserve's interest rate hike heated up and China's real estate data fell short of expectations, as of July 20, the price has fallen to $9,230 per ton, with a monthly amplitude of 6.2%.
The spot market shows regional differentiation: the premium of Shanghai spot copper (relative to futures) remains at 120-150 yuan/ton, reflecting tight domestic spot supply; while the discount of Rotterdam spot copper in Europe has expanded to -$35 per ton, highlighting weak local demand.
- Chile: Copper production in the first half of the year was 3.32 million tons, a year-on-year decrease of 2.1%. Escondida Copper Mine (the world's largest) saw its production in the first half of the year decrease by 3.8% year-on-year to 890,000 tons due to declining ore grades; the conversion of Codelco's Chuquicamata open-pit mine to an underground mine led to capacity reduction, affecting production by approximately 50,000 tons.
- Peru: Production in the first half of the year was 1.53 million tons, a year-on-year increase of 4.2%. After the resolution of labor disputes at Las Bambas Copper Mine (with an annual output of approximately 400,000 tons), it resumed full-capacity production, becoming a major driver of global supply growth.
- Africa: Copper production in the Democratic Republic of the Congo in the first half of the year was 920,000 tons, the same as the previous year. The temporary shutdown of Manika Copper Mine due to environmental issues affected global refined copper supply by approximately 12,000 tons/month.
The average grade of global copper ores continues to decline. In 2024, the average selected grade has dropped by 8.3% compared to 2020, resulting in a 5.7% year-on-year increase in unit production costs. Some high-cost mines have entered a production reduction cycle.
As the contributor to 54% of global copper consumption, China has a significantly differentiated demand structure:
- New Energy Sector: Photovoltaic installed capacity in the first half of the year increased by 38% year-on-year, driving copper consumption for photovoltaics to 280,000 tons (up 25% year-on-year); new energy vehicle production increased by 22%, driving copper demand for vehicles to 420,000 tons (up 18% year-on-year).
- Traditional Sectors: The area of new real estate starts decreased by 12% year-on-year, and copper consumption in construction dropped to 860,000 tons (down 4.3% year-on-year); copper demand in the home appliance industry was 530,000 tons, a year-on-year decrease of 2.1%, mainly dragged down by weak exports.
Demand in European and American markets is generally weak: U.S. apparent copper consumption in the first half of the year was 1.35 million tons, a year-on-year decrease of 1.8%; euro zone consumption was 980,000 tons, a year-on-year decrease of 3.2%, with industrial production contraction being the main reason.
- Exchange Inventories: LME copper inventories are 84,000 tons, a 32% decrease from the beginning of the year, at the lowest level for the same period since 2005; Shanghai Futures Exchange inventories are 148,000 tons, a year-on-year decrease of 18%, remaining below the historical average for 6 consecutive months.
- Hidden Inventories: China's social inventories (including traders and downstream enterprises) are approximately 520,000 tons, a 15% year-on-year decrease, reflecting the low willingness of the industrial chain to restock.
- Logistics Bottlenecks: The drop in water levels in the Panama Canal has reduced ship traffic by 30%, extending the transportation time of copper from Asia to the U.S. West Coast to 45 days (up 20% year-on-year), and freight rates have risen by 18% to $85 per ton.
- Demand Stimulus: Under the U.S. Inflation Reduction Act, the 2024 new energy infrastructure plan has released $12 billion in investment, which is expected to drive an increase in copper demand by approximately 80,000 tons; the EU's "Green Deal" is advancing rapidly, and copper demand for renewable energy projects has increased by 12% year-on-year.
- Trade Restrictions: India announced an increase in import tariffs on copper scrap from 5% to 15%, leading to an increase in its refined copper production costs by approximately $300 per ton, and some small smelters have suspended production.
- Mining Policies: The Chilean government has proposed a new mining law draft, intending to increase the copper mine concession fee from the current 2% to 5%. If passed, it will affect the supply costs of 12% of global copper mines.
Institutions predict that the global copper market will have a supply-demand gap of approximately 180,000 tons in 2024 (supply of 25.8 million tons, demand of 25.98 million tons), continuing the tight balance pattern. Short-term prices are dominated by macro sentiment and may fluctuate in the range of $9,000-$9,500 per ton; in the medium to long term, the contradiction between rigid demand growth in the new energy sector and lagging copper mine capacity release will support the upward shift of the copper price center, and the probability of breaking through $10,000 per ton by the end of the year is increasing. Industrial chain enterprises need to focus on the implementation of Chile's mining policies, the effect of China's real estate stimulus, and signals of the Federal Reserve's monetary policy shift.
