Copper prices hit a 9-year high, downstream companies under pressure

Copper is called “industrial bones and bones”. It is an important building material and a raw material for a variety of alloys. It is mainly used in industries such as electricity, home appliances, construction, and new energy vehicles. Since February of this year, copper prices have risen rapidly. The main force of Shanghai’s copper has risen to 70,000 yuan per ton, a 9-year high. It has recently adjusted slightly but still remains at a high level of more than 60,000 yuan, with a cumulative increase of more than 10%.

Industry experts said that the tight supply of copper coupled with the irreplaceability of electrical conductivity will allow copper prices to continue to maintain an upward trend. The reporter visited a number of electrical appliance malls in Beijing and found that under the pressure of rising copper prices, many home appliance brands have seen price increases or announced that they will increase prices.

Incremental demand for emerging industries is strong

The reporter learned that from 2020 to the present, the rise in copper prices is mainly divided into three stages. The first stage is from the end of March to July 2020. Under the environment of loose global liquidity, coupled with the resumption of domestic work and production, the price of copper will rise from more than 35,000 yuan per ton to about 52,000 yuan; second The stage is from November 2020 to January 2021. Within two months, the price of copper rose from 52,000 yuan per ton to 59,000 yuan, mainly because of the emergence of the new crown pneumonia vaccine and the good domestic real estate data; The third stage is from February of this year to the present, the copper price has risen to a maximum of 70,000 yuan per ton. Recently, it has slightly corrected but still remains high.

“From the perspective of supply and demand, copper may be in short supply for a long time.” Wu Zhiyuan, a nonferrous industry analyst at Yangtze River Securities, told reporters that according to data from the World Bureau of Metal Statistics, China’s demand for refined copper will account for the proportion of global refined copper demand in 2020. At 59%, it is the world’s largest copper consumer. Mainly used in electric power, home appliances, construction, new energy vehicles and other industries. Although the inventory demand for home appliances will gradually decline, in the short term, the incremental demand for emerging industries including wind power, photovoltaics, and new energy vehicles will continue to increase rapidly.

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In addition, data shows that the global annual demand for copper is about 24 million tons. According to estimates, as the penetration rate of new energy vehicles continues to rise, from 2021 to 2025, there is only one industry for new energy vehicles. There is a marginal demand increase of about 200,000 tons for copper.

“supply deficit” supports price increases

“From the supply side, on the one hand, the supply of primary copper is relatively tight, mainly because it takes time for some South American mines to resume production. At the same time, capital expenditure is insufficient and new capacity is limited. Global copper mine capital expenditure peaked in 2013. Long-term supply is insufficient. In addition, the global new mineral copper production capacity from 2021 to 2023 will be 1.26 million tons, 1.09 million tons, and 730,000 tons, respectively. After that, the new capacity is limited and the downward trend is obvious.” Wu Zhiyuan said.

On the other hand, the supply of recycled copper is not optimistic. Wu Zhiyuan believes that “about 70% of the recycled copper supply in the market comes from imports, and 30% comes from the domestic market. Although the price of recycled copper is high and foreign recycled copper traders are willing to ship, due to the impact of the epidemic, the efficiency of routes has decreased and freight rates have risen sharply. The supply of imported recycled copper has been hindered, and domestic recycled copper traders’ bullish reluctance to sell has aggravated the shortage of the overall recycled copper market. The tight supply of copper and the irreplaceability of electrical conductivity will support the upward trend of copper prices. ”

He Jinbi, Chairman of the Board of Directors of Maike Group, also said that with the gradual control of the epidemic, the global economy is in the initial stage of resuming work and production. The prices of various industrial base metals have risen, and there are various internal and external factors. On the one hand, it is related to the policy of a large number of excess goods and active fiscal stimulus during the 2020 epidemic. At the same time, China is vigorously developing clean energy such as wind energy, solar energy, and nuclear energy. In addition, China’s market share of electric vehicles will increase to 20% during the “14th Five-Year Plan” period. Electric vehicles and charging piles will use four times the amount of copper used by ordinary vehicles. There will be a serious imbalance between supply and demand for basic metals in the future. , Will inevitably drive the investment demand of the capital market. In the past five years, the global investment in mineral resources has been seriously insufficient, and there will be conflicts between supply and demand for a long time in the future. Inflation and price increases are inevitable.

Goldman Sachs also predicts that in 2021, copper supply and demand will have the largest deficit in 10 years, and the target price of copper will be adjusted to US$10,000/ton. Goldman Sachs claimed that China’s copper demand exploded after the Spring Festival, which will result in a “copper supply deficit” and will trigger the next round of rising.

“Of course, there are speculative factors behind the rise in copper prices.” Wu Zhiyuan said that in the short term, China and the US monetary policy and liquidity, market sentiment, and consumption performance after entering the peak production and sales season will be the key to determining copper prices. In the medium term, as With the emergence of an inflection point in China’s economy and liquidity, copper prices may usher in an inflection point at the end of the first quarter or the beginning of the second quarter.

Home appliance industry under pressure

Due to the sharp increase in the price of a series of raw materials such as copper, the production plans of many companies have been disrupted, and many workshop production lines have pressed the pause button. At the same time, due to the rising cost of upstream raw materials, which has brought pressure on the operating costs of home appliance companies, many companies have chosen to increase the pick-up price to cushion the operating pressure, and the price increase of raw materials will eventually be transmitted to consumers at the end of the industry chain.

Recently, Midea Refrigerator announced that the price of Midea refrigerators will increase by 10% to 15% from March 1. This is also the first home appliance company to announce price increases in 2021.

At the same time, Gree Electric’s chairman Dong Mingzhu said recently when talking about the price increase of air conditioners that the price increase of air conditioners was due to the recent increase in copper prices, but not long-term. Gree insists not to raise prices, but if copper prices continue to rise, it depends on the situation.

Speaking of the price increase trend of home appliances, Major General Ding, an observer of Sankei and the founder of Nail Technology, said that it has appeared since the second half of 2020 and is expected to continue into the first half of this year. He believes that there are two main reasons for the price increase of home appliances: one is caused by the increase in raw material costs; the other is that the price war in the home appliance industry has been fierce before, and there is now a certain recovery increase.

For home appliance companies, how to deal with the price increase caused by the rise of raw materials, Major General Ding suggested that in the short term, hedging, hedging, and hoarding can be used to lock in the risk of raw material price increases in advance; in the long run, it is still necessary to optimize the supply chain. Manage, reasonably set inventory scale; at the same time, actively promote the optimization and upgrading of product structure, enhance product competitiveness and brand profitability, and achieve a better balance between development scale and development quality.

Post time: Mar-23-2021
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