Our Metals & Minerals team recently attended the annual copper forum at Yingtan in China
The copper market started 2019 at lows not seen for around two years after having fallen sharply since mid-2018. Speakers and delegates at the Yingtan forum discussed many market issues, but the question of whether copper’s fortunes would rise in 2019 was central. We have selected the following as key takeaways from the event.
Concentrate supply has been lagging behind demand as Chinese smelters have been raising capacity over the last two years while investment on the mining side has been limited. Treatment and refining charges (tc/rc) have fallen sharply with the growth of smelting capacity and competition for concentrate. China’s concentrate imports hit a record high for the month in February, and the country’s smelters are expected to add a further 950,000t of capacity this year, according to research firm Antaike. The tightness of concentrate supply is expected to ease slightly over the first half of this year, but the tc/rc are likely to remain low. Trading groups recognise the opportunity presented by this situation, and companies started actively hiring concentrate traders toward the end of 2018. Some of our clients are working to strengthen their concentrate teams, and we expect this to continue in the medium term.
China imported a record 3.75mn t of refined copper in 2018, and import data show the country’s increased appetite running over into the start of this year. This increase broadly reflects the country’s need to meet downstream demand amid the ban on imports of Category 7 copper scrap and the fact that many smelters are undergoing maintenance. The current hiring trend on the refined copper side shows that companies are exercising caution and taking a wait-and-see approach, with no immediate need to build headcounts.
China’s economic expansion has slowed, but the market expects the country’s GDP to grow at 6-6.2% this year, signalling a stabilisation after last year’s bearish readings. The manufacturing purchasing-managers’ index rose to 50.8 in March from 49.9 in February, reflecting a return to expansion and calming concerns that the world’s second-largest economy was showing signs of industrial contraction. The general opinion at the Yingtan forum was that the refined copper market will remain steady and that there are reasons to anticipate demand growth, with the copper-hungry electric vehicle industry enjoying government support and the electronics sector showing signs of growth.
Access to credit has tightened for smaller Chinese companies, and market activity is becoming focused on the majors. The difficulties being faced by smaller participants have led to some companies closing down, driving supply of refined-metals talent higher.
Another topic of discussion at the Yingtan forum was the Industrial Internet of Things (IIoT) and the significance of the increasing digitalisation of the copper market. The IIoT platform collects big data and allows it to be shared across diverse groups such as copper companies, government agencies, lenders, insurers and logistics providers. The platform’s architecture allows greatly increased automation for producers, collaboration between companies and the ability to meet consumer needs with greater accuracy. The IIoT’s application is in its early stages and is therefore not driving talent demand, but we expect activity to increase with time.