Debon Securities released a research report stating that copper prices began to decline in July, and later received bottom support as market sentiment recovered and domestic copper inventory was reduced. At the end of August, overseas and domestic copper inventories resonated in reducing stocks, and in September, the Federal Reserve's interest rate cut of 50BP boosted copper prices. In terms of cost, according to Antaike data, the 90th percentile cash cost in 2021 soared to $5,718 per ton, and the bottom space of copper prices continued to rise. On the supply side, copper ore imports decreased year-on-year, and refined copper exports continued to increase; on the demand side, copper consumption in the fields of electricity, new energy vehicles, and home appliances performed well, with high production and sales volume of new energy vehicles, which significantly stimulated copper consumption.

The main points of Debon Securities are as follows:

In the third quarter, the treatment charge (TC) slightly increased but remained at a low level. Copper prices began to decline in July, and later received bottom support as market sentiment recovered and domestic copper inventory was reduced. At the end of August, overseas and domestic copper inventories resonated in reducing stocks, and in September, the Federal Reserve's interest rate cut of 50BP boosted copper prices. The first interest rate cut since March 2020 marked the shift from a monetary policy tightening cycle to a loosening cycle, copper continued to rise, macro sentiment improved, and copper prices rebounded after a second bottoming.

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In the United States, non-farm employment increased by 254,000 people in September, with an expected 150,000 people, and the total employment for August and July was revised up by 72,000 people. The unemployment rate in September was 4.1%, lower than the expected 4.2%, and 4.2% in August. The average hourly wage in September increased by 4% year-on-year and 0.4% month-on-month, both higher than expected. The significant increase in U.S. employment in September exceeded expectations, setting the largest increase since March this year, the unemployment rate unexpectedly declined, and the year-on-year wage increase eased concerns about the deterioration of the U.S. labor market. In addition, the U.S. core PCE in August was 2.7%, and the overall PCE decreased to 2.2%, the lowest level since March 2021.

In terms of cost, the global copper mine cash cost continues to rise. According to Antaike data, the 90th percentile cash cost in 2021 soared to $5,718 per ton, and the bottom space of copper prices continued to rise; on the smelting side, the CSPT group held a quarterly meeting on September 24 and determined the spot purchase guidance processing fee for copper concentrate TC/RC for Q4 2024 as $35 per ton and 3.5 cents per pound, which was higher than the $30 per ton and 3 cents per pound for Q3 2024. According to SMM calculations, the spot smelting loss of copper concentrate in September was 1,524 yuan per ton, and the long-term contract smelting profit was 1,879 yuan per ton.

The supply of ore has shifted from loose to tight balance, and copper consumption in the fields of electricity, new energy vehicles, and home appliances has performed well.

On the supply side: Copper ore imports decreased year-on-year, and refined copper exports continued to increase. The spot price of copper concentrate TC recovered from $2.60 per dry ton at the end of June to $9.10 per dry ton at the beginning of October, and CSPT officially determined the guidance processing fee for spot purchase of copper concentrate for Q4 2024 as $35 per ton. In July 2024, according to ICSG statistics, the global recycled refined copper output was 401,000 tons, the primary refined copper output was 1,949,000 tons, with a total output of 2,351,000 tons, a year-on-year increase of 7.1%.

As of August 2024, China's cumulative refined copper output was 8.908 million tons, a year-on-year increase of 6.2%. In August 2024, China imported 2.5736 million tons of copper ore and concentrate, a year-on-year decrease of 4.4%. Looking at the import sources, the increase in copper concentrate imports in August mainly came from Peru, Chile, the Democratic Republic of the Congo, and other places, while imports from Kazakhstan, Spain, the Philippines decreased; from January to August, China's cumulative import of copper ore and concentrate was 18.635 million tons, a year-on-year increase of 3.2%; in August 2024, refined copper exports were 31,000 tons, a year-on-year increase of 49.57%; from January to August, the cumulative export was 403,000 tons, a year-on-year increase of 85.49%, and the monthly and cumulative export numbers have maintained a year-on-year positive growth for three consecutive months.

On the demand side: Copper consumption in the fields of electricity, new energy vehicles, and home appliances has performed well. Both power generation and power grid investment increased year-on-year. From January to August 2024, the national main power generation enterprises completed an investment of 497.6 billion yuan in power source projects, a year-on-year increase of 5.1%; the cumulative value of grid project basic construction investment was 333 billion yuan, a year-on-year increase of 23.1%. The high production and sales volume of new energy vehicles significantly stimulated copper consumption. From January to September 2024, automobile production and sales were completed at 21.47 million and 21.57 million units, respectively, with year-on-year increases of 1.9% and 2.4%, respectively, among which, the production and sales of new energy vehicles reached 8.316 million and 8.32 million units, respectively, with year-on-year increases of 32% and 33%, respectively, and the market share further increased to 38.6%.

In addition, home appliance exports performed strongly. From January to August 2024, household air conditioner production was 14.0067 million units, a year-on-year increase of 11.89%; sales were 14.2713 million units, a year-on-year increase of 12.4%, among which, domestic sales were 7.7664 million units, a year-on-year increase of 0.2%; exports were 6.5049 million units, a year-on-year increase of 31.4%.Investment Advice

According to Debon Securities' calculations and organization, the global copper mine supply increase in 2024 is 275,000 tons, with a growth rate of 1.2%, and the recycled copper increase is 46,000 tons, with a growth rate of 0.9%. The total copper supply is 27.24 million tons, with a growth rate of 1.2%. The global refined copper demand is 27.32 million tons, with a growth rate of 2.9%. The copper supply is expected to be in a tight balance throughout the year. In 2024, the global monetary environment is expected to shift from tight to loose, and the domestic economy will gradually recover. Internationally, the Federal Reserve plans to continue with rate cuts in November and December; domestically, the central bank has introduced a new "three arrows" policy, and it is expected that the macro sentiment will continue to boost market confidence. After the economic bottom is consolidated, industrial metal prices related to the domestic economy are expected to usher in a sustained upward trend, and the financial and industrial attributes of the copper industry may resonate.

Recommended targets: Zijin Mining (601899.SH), Luoyang Molybdenum (603993.SH), Tongling Nonferrous (000630.SZ), Zangge Mining (000408.SZ), Jinchengxin (603979.SH), Western Mining (601168.SH). Keep an eye on Jiangxi Copper (600362.SH), Yunnan Copper (000878.SZ), Minmetals Resources (01208), China Gold International (02099), and China Nonferrous Mining (01258).