Analysis of Copper Processing Products Production and Copper Consumption in China



Analysis of Copper Processing Products Production and Copper Consumption in China

China is the world's largest producer of copper processing products as well as the world's largest copper consumer market. In 2013, China produced more than 13.60 million tons of copper processing products, accounting for 60% of the world's total production. Since then, this proportion has expanded year by year, and will increase to about 66.7% in 2016. Meanwhile, China consumed nearly 11 million tons of copper produced from copper processing products in 2013, and this figure has since then increased on a yearly basis and will exceed 13.40 million tons in 2016.

The latest data of the China Nonferrous Metals Industry Association (CNIA) shows that the production of copper processing products in China was 16.188 million tons in 2015, down dramatically from the previous initial production of 19.135 million tons, In the first 11 months of 2016, the total production of copper processing products in China was 18.879 million tons, up by more than 12.9% over the same period of 2015. This means that the total production of copper processing products in China will reach 20 million tons in 2016.

However, according to the actual operation of the industry in recent years, Antaike has always believed that since 2013, the officially-announced initial production value of copper processing products in China is much higher than the actual value. In fact, Antaike's forecast of the annual production for the last three years is very close to the CNIA's revised data. Therefore, based on a comprehensive study of industry growth trends and product structure changes, Antaike believed that the total production of copper processing products in China in 2016 will grow by 3.9% than 2015 and is expected to reach the record high of 16.82 million tons.

Among the copper processing products, the copper wire will remain the kind of product that sees the biggest production growth in 2016, while the copper foil will become the fastest-growing kind of product. It is expected that the copper wire production in China in 2016 will grow by 8.1% than 2015 to reach 7.4 million tons, and its proportion in total production will also expand to 44%. The copper foil production will grow by 8.7% year-on-year to reach 350,000 tons. In addition, the production of copper strips and copper rods will grow by 3.3% and 3.1% to reach 3.25 million tons and 2.35 million tons respectively. The copper pipe production will be 2.75 million tons, down by 6.5% year-on-year.

The main raw materials of copper processing products are refined copper and scrap copper. But there are many kinds of copper processing products, and copper processing products of the same shape can be made of different alloy materials. Therefore, analyzing the copper consumption of various kinds of copper processing products can facilitate the preliminary calculation of total copper amount required for industry production and provide a more direct reference index for the analysis of refined copper supply and demand. The difference between the copper consumption for the production of copper processing products and the supply of refined copper is the scrap copper consumption for the production of copper processing products (copper content).

According to the latest data of the CNIA, Antaike's calculation results of copper content in different kinds of products show that during 2001 and 2012, the conversion factor of the total copper consumption for the production of copper processing products in China to the total production of copper processing products of that year was between 0.790 and 0.807. The copper consumption for the production of copper processing products in China, after exceeding 10 million tons for the first time in 2013, has maintained growth on a yearly basis and is expected to reach a new high of nearly 13.50 million tons in 2016.

As for the production of specific products, the rapid growth of copper wire production is still the primary factor in maintaining steady growth in copper consumption for the production of copper processing products in China. According to Antaike's analysis, as the newly-built continuous casting and rolling copper rod projects were consecutively put into production, copper wire production in China climbed from 3.99 million tons in 2011 to 6.218 million tons in 2015, its copper consumption also grew from 3.16 million tons to 5.42 million tons and its proportion in total copper consumption also rose from 37.8% to 41.8%. It's estimated that the copper consumption for the production of copper wires will reach 5.861 million tons in 2016, accounting for 43.5% of the total copper consumption.

The copper consumption for the production of the other three main products-copper strips, copper pipes and copper rods will be 2.302 million tons, 2.767 million tons and 1.753 million tons respectively in 2016.

In fact, with significant improvement of domestic copper smelting capacity, the demand for raw materials of scrap copper has increased dramatically. In addition, as the price advantage of scrap copper over electrolytic copper is no longer obvious, the direct consumption of scrap copper for the production of copper processing products has been shrinking in recent years. But by conservative estimate, the direct consumption of scrap copper for the production of copper processing products in China was about 2.5 million tons in the past two years and will increase to nearly 2.7 million tons in 2016.

In addition, by taking into account the direct consumption of scrap copper, Antaike revised the domestic refined copper production and then conducted an analysis, which showed that the supply of domestic refined copper has been surplus to the consumption of refined copper for the production of copper processing products in recent years. But the surplus has declined markedly after exceeding 1.6 million tons in 2012, and one of the important reasons is the obviously declining demand for "financing copper". In China, the supply of refined copper topped the 10-million-ton mark for the first time in 2014, while the consumption of refined copper for the production of copper processing products exceeded 10 million tons for the first time in 2015. Meanwhile, the surplus between the supply of refined copper and the consumption of refined copper for the production of copper processing products in China has gradually declined since 2014. The surplus declined to 460,000 tons in 2015 and the supply and demand are expected to be balanced in 2016. Antaike predicted that the consumption of refined copper for the production of copper processing products in China will slightly increase to 10.78 million tons in 2016.

In fact, the above findings also reflect the market status quo from one aspect, that is, when the supply and demand of refined copper return to normal, the fluctuation of copper prices will also be normalized. Therefore, from the perspectives of copper processing products production and copper consumption in China, Antaike's existing research results show that copper prices have bounced back in 2016 after staying at a low level in recent years, and are expected to rise again after 2017.