China's Copper Market Analysis and Outlook y

China's Copper Market Analysis and OutlookChina's Copper Market Analysis and Outlookyy

Zhang Fang Yang ChanghuaBeijing Antaike Information Development Co., Ltd.j g p

Lisbon, 9 March 2016

免责申明：北京安泰科信息开发有限公司（以下简称“安泰科”）力求本报告中所采用的数据或资料客观公正且真实可信，报告中的任何观点与建议仅代表报告当日的判断和建议，不构成投资建议，也不保证对作出的任何建议不会发生任何变更。任何根据本报告作出投资所引致的后果，与安泰科及分析师无关。

ContentsContents Production

Copper Mine

Copper Scrap

Smelting and Refining

ConsumptionConsumption by sectors

The main consumption potential in futureThe main consumption potential in future

Consumption forecast

Copper Trade Copper Trade Copper Supply/Demand Balance Conclusions Conclusions

信息成就事业信息创造价值Page 2

China's copper in conc. production will growing slowly

During 2000-2015, China’s copper in concentrate production increased from 593kt to 1558kt, with anaverage annual growth of 6.65%，China is the biggest contributor of copper in concentrate productionin the world. Copper in concentrate production has declined in the resent 2 years. It is forecasted thatproduction will increase again. But ,the growth is merely 3~4%, because the price of copper falling andthe reducing Copper project under construction, and the production is expected to 1780kt in 2020.

200025%Mine Province Capacity Start up Status

1600

1800

15%

20%Cu Conc. %

Mine Province Capacity Start up Status

Qulong Tibet 100 2017 Developing

1000

1200

1400

5%

10%Pulang Yunnan 48 2017 Developing

Shaxi Anhui 16 2016 Developing

600

800

-5%

0% Xiongcun Tibet 60 2016 Developing

Duobaoshan Phase II

Heilongjiang 25 2017 Feasibility

400-10%2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Total - 249 -

Cu in Concentrate Production and Growth Rate in 2000-2020 Selected Cu Mine Project in 2016-2020


Unit: Kt Cu Unit: Kt Cu

The supply of the scrap copper will mainly rely on the domestic recycle

From 2000 to 2015, The total supply of the copper scrap increased from 760 kt to 2490kt ,with an average annual increase of 8.2%. the import copper scrap grow rapidly, however, in 2003, gradually declining after it had reached peaks. The domestic scrap grow quite slowly.

It is expected that the import scrap copper will solid at about 1600 between 2016 and 2020. The domestic copper scrap will have significant increase, and will exceed the import around 2019 and become the main supplier.

1600

1800

2000 Domestic Import

800

1000

1200

1400

200

400

600

800

Copper Scrap Supply in 2000-2020 Unit: Kt Cu

0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020


Indirect use of copper scrap use is the main way

Early in 2000-2015, the direct use is the in most important way of scrap copper in china. With the hugeexpansion of the copper refining capacity ，smelters' demand about copper scrap are growing rapidly.At the same time ， After technology upgrades, the copper processing enterprise need more pure rawmaterial, it reducing the use of miscellaneous copper scrap ratio，lead to copper scrap using indirectproportion rising ，it is account for 72% ，and it expected to enhance about 78% in 2020.

100%

70%

80%

90%

30%

40%

50%

60%

0%

10%

20%

30%

Copper Scrap Use Structure in 2000-2020 Unit: Kt Cu

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Indirect Use Direct Use


The expansion peak of smelting capacity has gone

The year between 2000 and 2005 has witnessed the rapid growth of copper smelting and refiningcapacity. The smelting capacity increased from 1.18Mtpa to 6.18Mtpa. with refining capacity from 1.69Mtpa to 10.59Mtpa. The latter grow more rapidly.

Chinese capacity of copper smelting will slowdown between 2016 and 2020, however, it will exceeds 1millions tons which was planed. The smelting capacity will be up to 7.70 Mtpa and refining capacity, 12.0 Mpta, in the 2020.

Smelting Refining StartProject Smelting Cap.

Refining Cap.

Start up Status

Minmetals Hunan 100 100 2016 Developing

Nanguo Copper 150 150 2016 Developing10.00

12.00

14.00

Qinghai Copper 100 100 2017 Developing

Ruichang XikuangCopper 200 200 2017 Developing6.00

8.00

Zhongtiaoshan 150 150 2018 Feasibility

BayannurXiangguang Copper 200 - 2018 Feasibility

Chinalco Fujian 400 400 Planned0.00

2.00

4.00

Chinalco Fujian 400 400 - Planned

Total 1,300 1,100

China Smelting and Refining Capacity Trend in 2000-2020 Selected Cu Smelter Project in 2016-2020

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Smelting Ref ining


Unit: Mtpa Unit: Ktpa

.The growth of blister and cathode productiong will slow down

During 2000-2015, the copper blister production increased from 0.98Mt to 4.84 Mt, and copper cathode increased from 1.37 Mt to 7.36 Mt, with an average annual growth of 11.2% and 11.9% respectively. The gap has increased from 0.39 Mt, in 2000, to 2.52 Mt in 2015. That’s why China imported large quantity copper scrap and copper blister.

10 00

7.00

8.00

9.00

10.00

4.00

5.00

6.00

0.00

1.00

2.00

3.00

Blister and Cathode Production in 2000-2020 Unit: Mt

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Blister Cathode



Copper Mine

Copper Scrap


Consumptionconsumption by sectors





Main driving force of China's copper demand

The main driving force of China's copper demand during 2000-2015：

The fast development of industrialization ---- industrial equipments, transportation equipments, increasing Electricity demand and so onincreasing Electricity demand and so on .

Infrastructural investment ---- power grid construction and upgrade （urban and rural area ' s power network）, highway, railway, airport, and so on.

Processing trade ----electromechanical device household electrical appliances electronic products Processing trade ----electromechanical device ,household electrical appliances, electronic products and other copper product.

Investment in real estate ---- Building wire, power distribution system and distribution equipment , house decoration ,household appliances ,bath product and so on

Improvement of living standards----automobile, household appliances, the increasing of telecommunications and electricity used.

Expansion in copper production and demand ----use of raw material and start production stock ,etc


The power industry is the most important consumers

The main consumption in china’s copper consumption is power industry, it is occupied more than 40%, It close to 50% in recent years. The next is the air conditioning and refrigeration industry ，it is accounted for 15.3% In 2015. As same as other major industries, such as architectural engineering, communication and transportation and electronics industry ,accounted for 7.0-10%。

80%

90%

100%

40%

50%

60%

70% Others

Electronic

Construction

Transportation

10%

20%

30%

40% Transportation

ACR

Power

Refined Copper Consumption Structure in 2000-2015

0%2000 2002 2004 2006 2008 2010 2012 2014


Copper consumption growth will show a sizable decline.

In 2000-2015, China‘s refined copper consumption increased from 1.87 Mt to 9.93 Mt, with an averageannual growth rate of 11.8%. But Since 2010, With the adjustment of China’s economic structure,consumption growth of copper continues to fall away, the growth rate fell below 10% in 2012， thenreach 3 6% in the past two yearsreach 3-6% in the past two years .

In 2016-2020, China’s copper consumption will keep slow growth, with an average annual growth rateof 3-4%. China’s copper consumption is expected to reach 11.67Mt in 2020.

12 025%

10.0

12.0

20%

25%

6.0

8.0

10%

15%

2.0

4.0

5%

10%

0.0 0%2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Cu Consumption %


Refined Copper Consumption Trend in 2000-2020 Unit: Mt

The main growth potential of the Copper consumption

The power industry will continue to be the biggest contributor of copper consumption growth.

The upgrading of electric distribution network, the rural reform of power grid. di t th 13thaccording to the 13th

five year plan, the investment in electric distribution is more than RMB 2000 billion, among which morethan RMB 700 billion will go to rural reform of power grid.

Investment on clean energy. photovoltaic power generation, wind power generation, and nuclear est e t o c ea e e gy p o o o a c po e ge e a o , d po e ge e a o , a d uc eaenergy, etc.

New energy car. By the end of the 2014, China had built 636 charging station for new energy autos and 12 thousand ch

i t B Chi ’ l b 2020 th ill b 500 illi t 12 th darging spots. Base on China’s plan, by 2020s, there will be 500 million new energy autos, 12 thousandcharging station, and 4.5 million charging spots.

The urbanized building of new patterns. By 2020s, the permanent resident population will be up tog p y , p p p p60 percent compared with present 56 percent.



Copper Mine

Copper Scrap


Consumptionconsumption by sectors





Copper import increase mainly comes from refined copper and copper concentrates

China is the largest copper importer in the world, the main imports of copper products trend to increasing during 2000-2015. The most rapidly increasing are refined copper and copper concentrates, with the cumulative increase 451% and551% accordingly. The greatly increase of refined copper mainly came from 2009,owing to the crash of copper price andmoney abundance while the increase of copper concentrates was mainly from 2011,when the smelting copper was inthe peak of the production Then copper blister and scrap are increased to 307% and 290% accordingly; copper semisthe peak of the production. Then copper blister and scrap are increased to 307% and 290% accordingly; copper semiswas decreased to 24% because of the improvement of production of copper process and technologies.

Refined copper imports is expected to drop in 2016-2020 ,lying in the narrowing of the domestic supply, while copperconcentrates keeps increasing owning to the increasing demand of smelting capacity; the import of the copper scrapkeeps steady and the imports of copper semis keeps falling.keeps steady and the imports of copper semis keeps falling.

3 00

3.50

4.00

2.00

2.50

3.00

0.50

1.00

1.50

0.00 2000 2002 2004 2006 2008 2010 2012 2014

Ref ined Cu Blister Semis Cu Conc. Scrap


Selected Copper Products Import in 2000-2015 Unit: Cu Content Mt

The main exports is refined copper and semis The copper exportation in China are mainly refined copper and copper semis, the export volume of them were increased

by 85% and 223% accordingly during 2000-2015. In which the refined copper exportation fluctuated obviously influencedby the foreign trade policy and RMB exchange rate; the increasing of copper material exportation was happened in2001-2006, then affected by the copper tube suffered anti-dumping and the economic downturn, the increasing trend

t d d th t ti l t d t b t dwas stopped and the exportation volume tends to be steady.

The Chinese copper exportation remains focus on the refined copper and copper semis in 2016-2020, in which therefined copper exportation still fluctuate a lot , the copper semis exportation possibly again ascends the rising trendbecause it is predicted that the world economy will be recovered then.

0.35

0.40

0.45

0.20

0.25

0.30

0.05

0.10

0.15

0.00 2000 2002 2004 2006 2008 2010 2012 2014

Ref ined Cu Semis


Refined Cu and Cu Semis Export in 2000-2015 Unit: Cu Content Mt


Copper Mine

Copper Scrap


ConsumptionConsumption by sectors



Copper Trade Copper Trade Supply/Demand Balance Conclusions Conclusions


Surplus of copper Though china is short for copper, the import is large, the refining copper and the copper concentrates i

n domestic market are oversupply. The oversupply of the copper concentrate is mainly because of theexpansion of the production capacity to increase the material stock prepared for production. Apart fromthe expansion of production capacity, financing trade , arbitrage trade, and agency for purchase, etc. gp p p y, g , g , g y p , gave rise to the oversupply of the refining copper.

It is expected that the copper continue oversupply, mainly due to the expansion and the long-standing arbitrage trade.

600

800

1000

0

200

400

-400

-200

0

-600 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Ref ined Cu Cu Conc.


Refined Cu and Cu Concentrate Balance in 2000-2020 Unit: Cu Content Kt

The copper in concentrate production gap will further widen

During 2000-2015, the gap between production and demand for refined copper and copper concentratecontinued to widen, for copper concentrate, increased to 3.43Mt from 0.42Mt, with an increase of3.01Mt; and refined copper, increased to 2.57Mt from 0.50Mt, with an increase of 2.07Mt

During 2016 2020 the gap of refined copper will gradually reduce to be about 2 3Mt in 2020 and the During 2016-2020, the gap of refined copper will gradually reduce, to be about 2.3Mt in 2020, and thegap of copper concentrate will gradually enlarge, to be about 5.1Mt in 2020.

-1.0

0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

-3.0

-2.0

-5.0

-4.0

-6.0

Ref ined Cu Cu Conc.


The Supply Gap of Refined Cu and Cu in Concentrate in 2000-2020 Unit: Cu Content Mt


Copper Mine

Copper Scrap


ConsumptionMajor industries consumption sectors

Main consume potential in futureMain consume potential in future

Copper Consumption Forecast

Copper Trade Copper Trade Supply/demand Balance Conclusions Conclusions


ConclusionsThe growth rate of production and consumption will slow down.

1. The growth rate of Chinese copper mine production will slow down, Meanwhile, the domestic copper scrap generation will increase, it is expected to exceeds its import, and will become the main supplier.

2. The expansion peak of smelting capacity has gone. However, the domestic market are still in urgent need of copper concentrates, due to the release of capacity and some new project.

3. The increasing output of refined copper gradually slowdown.

4. The consumption of copper will slow down. However China will be main contributor to global copper usage. the potential demand of copper focus on power industry, mainly in the distribution of the rebuilding network and the new energy industry.


Thanks for you attention.y

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China's Copper Market Analysis and Outlook y