Upload
others
View
4
Download
0
Embed Size (px)
Citation preview
30%Building Construction
Equipment31%
15%Infrastructure
12%Trasport
12%IndustrialChina
11,923
Key copper consumer markets (thousand tonnes), 2017
United States
1,781
Germany
1,200
Japan
974
South Korea
656
Italy
652
Australia is the world’s3rd largest exporter of copper ores and concentrates
Copper is 100% recyclableand nearly 80% of the copper that has ever been produced is still in use today
The average home contains 180 kg of copper
WA
NT
QLD
SA
NSW
VIC
TAS
Major Australian copper deposits (Mt)
Global uses of copper
DepositOperating mine
>6.92.2–6.80.9–2.10.03–0.80.02<0.01
producer of copperin the world
7th largestAustralia is the
CopperResources and Energy Quarterly September 2018
Resources and Energy Quarterly September 2018 83
12.1 Summary
Trade tensions have hit copper prices in recent months, causing a 20
per cent decline. However, rising demand is expected to gradually
reverse this fall, with prices forecast to rise from US$6,726 a tonne in
2018 to US$7,734 by 2020.
Australia’s copper exports are forecast to rise from 888,000 tonnes in
2017–18 to over 1 million tonnes (in metal content terms) in 2019–20.
This reflects an increase in production from several existing mines.
Australia’s copper export earnings are forecast to lift from $8.5 billion
in 2017–18 to $11.3 billion by 2019–20. Exports should benefit from
rising production and from price growth later in the outlook period.
12.2 Prices
Copper prices have dropped, temporarily
Copper prices have turned bearish in recent months, plunging by 20 per
cent to a 14-month low (of around $US6,000 a tonne) in early August. US–
China trade tensions played a significant part in the recent decline: these
tensions are widely considered to be one of the leading threats to global
economic growth in the coming year. Copper is often considered a global
economic barometer as a result of its importance for infrastructure
development and manufacturing.
Instability in copper prices has been exacerbated by events in Turkey,
where high current account deficits and a government freeze on interest
rates have led to a currency crisis. Recent progress in wage talks at
Escondida — the world’s largest copper mine — has also boosted copper
supply, stemming potential upward pressure on copper prices.
Copper prices are expected to recover
Copper prices appear increasingly out of step with the fundamentals of
global copper supply and demand, and are consequently expected to start
recovering in the near-term. While trade tensions are likely to continue, it is
Figure 12.1: Outlook for copper stocks and prices
Source: LME (2018) official cash price; Department of Industry, Innovation and Science (2018)
Figure 12.2: Long-term change in quarterly copper consumption
Source: World Bureau of Metal Statistics (2018); Department of Industry, Innovation and Science (2018)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0
1,500
3,000
4,500
6,000
7,500
9,000
2013 2014 2015 2016 2017 2018 2019 2020
Wee
ks o
f co
nsu
mp
tio
n
US
$ a
to
nn
e
Weeks of Consumption Spot price
0
1
2
3
4
5
6
7
1998 2002 2006 2010 2014 2018
Mill
ion
to
nn
es
Europe Africa Asia Americas Oceania
Resources and Energy Quarterly September 2018 84
expected that this will lead to greater price volatility rather than further
declines. Rising demand (see Figure 12.2) should see copper prices
recover late in 2018, and then lift to around $US7,088 a tonne in 2019 and
$US7,774 a tonne in 2020. The fundamental conditions for copper remain
strong, with industrial production rising and new consumer products
emerging rapidly.
12.3 World consumption
Copper consumption is set for solid growth over the next two years
Global copper consumption is projected to rise from 24.5 million tonnes in
2018, to 25.7 million tonnes by 2020. Higher copper consumption reflects
solid growth in global industrial production (see Figure 12.3) and a ramp-
up in the development of copper-intensive technologies. Consumption
over the short term is likely to be constrained to some degree by recent
soft outcomes for fixed asset investment in Chinese manufacturing, real
estate and infrastructure. Spending on Chinese infrastructure has been
consistently below expectations in recent months (see Figure 12.4). As
China consumes around half of all copper, this drop in usage has led to a
significant fall in monthly consumption, even though industrial demand
from the US and other countries has remained solid (see Figure 12.5).
Partly offsetting this, China has recently announced significant stimulus
measures, in an effort to offset the impact of trade tensions with the US.
These measures include tax cuts, which have been heavily targeted at
research and development (R&D) spending. (Any resulting rise in R&D
spending should benefit long term copper demand, due to copper’s use in
many forms of emerging technology.) The Chinese Government has also
brought forward a planned release of RMB1.35 trillion in bonds to sponsor
infrastructure investment by local governments. These measures are
expected to boost copper usage from mid-2019.
Dependence on China may also be reduced in the medium term by a rise
in global electric vehicle usage. Electric vehicles typically contain about 90
kilograms of copper, and strong growth in sales across many nations is
likely to result in a more balanced global market in the next few years.
Figure 12.3: World copper consumption and industrial production
Source: World Bureau of Metal Statistics (2018); Bloomberg (2018) Netherland CPB; Department of Industry, Innovation and Science (2018)
Figure 12.4: Growth in China’s energy sector
Source: Bloomberg (2018) National Bureau of Statistics China; Department of Industry, Innovation and Science (2018)
-8
-4
0
4
8
12
16
2013 2014 2015 2016 2017 2018 2019 2020
Ye
ar-
on
-ye
ar
pe
r ce
nt ch
an
ge
Consumption Industrial Production
-40
-25
-10
5
20
35
50
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018
3 m
on
th r
olli
ng
Yo
Y g
row
th
Bill
ion
Kilo
wa
tt H
ou
rs
Thermal Hydro
Nuclear Power Grid Investment (rhs)
Resources and Energy Quarterly September 2018 85
12.4 World production
World copper mine production has been constrained by supply disruptions
Copper production faced some significant disruptions in the first half of
2018. Persistent threats of industrial action in Chile, export curbs in
Indonesia, and sudden cuts in recycled supply from China have all created
volatility and uncertainty within copper markets. However, the primary
uncertainty now appears to have switched to the consumption side, and as
supply has steadied, prices have plunged significantly. It is expected that,
on the supply side at least, copper will have a less volatile end to 2018,
with new supply kicking in from several sources.
The underlying supply picture remains strong, as Figure 12.6 shows.
Output from South America and Southeast Asia provided a solid lift to
global copper production during 2018. Production in Chile has increased
by almost 14 per cent over the past year, and the threat of industrial action
at the Escondida mine (which accounts for almost 5 per cent of global
supply) has receded for the time being. Management at the mine has
announced a deal in a new labour contract with the union, though the
terms have yet to be put to the rank-and-file union members for a vote. At
the time of writing, strikes at the mine have been put on hold after several
months of unrest.
Copper supply from Zambia is also rising significantly, as substantial
investment begins to unlock new ore deposits. Investment has been
supported by improved stability in Zambia’s domestic power supply, as
well as a period of strong growth in prices. Output from Indonesia is also
growing significantly, after its temporary ban on concentrate exports was
terminated in April.
Partly offsetting these positive supply trends, production in Canada and
the US appears to be contracting at present, with trade tensions affecting
investor confidence and discouraging some potential ramp-ups.
Figure 12.5: World copper demand growth vs. US PMI
Source: Bloomberg (2018); Department of Industry, Innovation and Science (2018)
Figure 12.6: World copper production and prices
Source: World Bureau of Metal Statistics (2018); Department of Industry, Innovation and Science (2018)
40
43
46
49
52
55
58
61
64
-16
-12
-8
-4
0
4
8
12
16
May-14 May-15 May-16 May-17 May-18
Ind
ex
Ye
ar-
on
-ye
ar
pe
r ce
nt ch
an
ge
Consumption YoY US PMI (RHS)
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0
5
10
15
20
25
30
2013 2014 2015 2016 2017 2018 2019 2020
US
$ a
to
nn
e
Mill
ion
to
nn
es
Refined production Mine production Spot price (rhs)
Resources and Energy Quarterly September 2018 86
World mine production is expected to recover rapidly
Rising output from South Asia and South America should support a lift in
global copper mine production, which is forecast to rise from 21.2 million
tonnes in 2018 to 23.2 million tonnes in 2020. Two mines are likely to play
a particularly significant role in enabling supply growth over the outlook
period: First Quantum Minerals’ new Cobre Panama mine is expected to
produce 330,000 tonnes annually from 2019, while Qulong’s new copper
mine in Tibet is expected to supply 120,000 tonnes. A further 300,000
tonnes is expected to be added by expanded capacity and upgrades
across numerous other mines around the world.
Rising production remains subject to several risks. These include a
potential re-emergence of industrial unrest in Chile, as well as ongoing
US-China and US-EU trade tensions, which could discourage output from
marginal facilities. However, copper stocks are currently relatively sound
(see Figure 12.7) which could curb supply risks somewhat.
World refined copper output is expected to rise over the outlook period
World refined copper output is forecast to grow from 24.3 million tonnes in
2018 to 25.5 million tonnes in 2020. This is expected to be driven by
emerging markets, which have already accounted for virtually all growth in
refined copper output over 2018 to date.
Over the first half 2018, output from Africa increased by about 10 per cent
(through the year), while output from South America grew by just over 4
per cent, and output from Asia rose by 2 per cent. Output from the EU has
been largely stable, while output from the US declined during the first half
of 2018. Efforts to build new refinery capacity have been concentrated in
countries with significant raw materials and relatively low labour costs, with
Chinese companies making up the most significant investors.
Secondary production faced some volatility after China cut its imports of
low grade scrap under new environmental laws (see Figure 12.8).
Recycled copper output is expected to drop in 2019 and then rebound in
2020, as Thailand and the Philippines move into the recycling market.
Figure 12.7: Copper stocks by location
Note: Selected key producers are forecast to increase production over the outlook
Source: AME (2018) Strategic Study 4Q 2017; Department of Industry, Innovation and Science (2018)
Figure 12.8: Secondary copper production and price
Source: Bloomberg Statistics (2018); Department of Industry, Innovation and Science (2018)
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018
Mill
ion
to
nn
es
Shanghai Futures Exchange LME (USA) Japan Canada
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
100
150
200
250
300
350
400
450
2012 2012 2013 2014 2015 2015 2016 2017 2018
US
$ a
to
nn
e
Th
ou
sa
nd
to
nn
es
Scrap Production Spot price (RHS)
Resources and Energy Quarterly September 2018 87
12.5 Australia
Mine production will be supported by rising output from existing mines
Australian production is projected to rise from 885,000 tonnes in 2017–18
to just over 1 million tonnes in 2019 and 2020 (see Figure 12.9). This
reflects higher output from several key mines, including Newcrest’s
sizeable Cadia Valley mine, which is expected to ramp up its production
significantly in 2019. CuDeco’s Rocklands mine in Queensland is also
ramping up production, while Sterlite Industries’ Mount Lyell mine is set to
return to normal production in 2019 following a brief period of care and
maintenance.
Copper production in Australia is likely to be supported by the strong
outlook of the fast-growing electric vehicle market. Growth in global
electric vehicle sales are expected to lift sharply from the early 2020s as
electric vehicles become fully price competitive with petrol vehicles. This is
likely to draw significantly on copper supplies, which are essential for
electric vehicle batteries. Rapid growth in battery supply chains is already
encouraging firms to lock in additional raw materials and develop new
refinery capabilities. Cassini Resources is currently seeking to develop
substantial deposits of copper and nickel in South Australia to support the
electric vehicle market, and the company has already received a $US3
million placement from Guanzhou Tinci Materials in China.
BHP is also assessing the options for a potential $2.1 billion expansion of
its Olympic Dam mine. This expansion would lift copper output from the
facility by around 50 per cent to over 300,000 tonnes per year. A decision
is expected by 2020. Although the long-term prospects for Olympic Dam
remain strong, the mine has had some mixed results this year, with copper
production disrupted in August by the failure of boiler tubes at its acid
plant. This led to some further technical difficulties which are expected to
hinder production for around two months.
Copper exports are expected to keep rising over the outlook period
Australia’s copper export earnings are estimated to have lifted by 11.9 per
cent to $8.5 billion in 2017–18. This represents a slight downward revision
from the last Resources and Energy Quarterly, reflecting the recent price
drop. Export earnings have, however, been supported by a return to
normal production among operations at the Cadia Valley, Mount Lyell and
Rocklands mines.
Higher production and modest price growth are expected to increase
Australia’s copper export earnings from $8.5 billion in 2017–18 to $10.5
billion in 2018–19. Further price growth is then forecast to push earnings
up to $11.3 billion by 2019–20 (see Figure 12.9).
Figure 12.9: Australia’s copper exports
Source: Department of Industry, Innovation and Science (2018)
Exploration expenditure is picking up, with broad growth across states
Exploration spending lifted from $46.2 million in the March quarter to
$59.8 million in the June quarter 2018. Higher exploration was recorded in
NSW, Queensland, South Australia and Western Australia.
0
3
6
9
12
0
300
600
900
1,200
2013-14 2015-16 2017-18 2019-20
A$
bill
ion
s
Me
talli
c c
on
ten
t kilo
to
nn
es
Volume Value (rhs)
Resources and Energy Quarterly September 2018 88
Table 12.1: Copper outlook
Annual percentage change
World Unit 2017 2018f 2019f 2020f 2018f 2019f 2020f
Production
–mine kt 20,193 21,204 22,002 23,181 5.0 3.8 5.4
–refined kt 23,522 24,281 24,924 25,513 3.2 2.6 2.4
Consumption kt 23,733 24,467 25,195 25,674 3.1 3.0 1.9
Closing stocks kt 1 063 878 608 447 –17.4 –30.8 –26.4
–weeks of consumption 2.3 1.9 1.3 0.9 –19.9 –32.8 –27.7
Prices LME
–nominal US$/t 6,164 6,572 7,037 7,774 6.6 7.1 10.5
USc/lb 280 298 319 353 6.6 7.1 10.5
–real b US$/t 6,317 6,572 6,882 7,517 4.0 4.7 9.2
USc/lb 287 298 312 341 4.0 4.7 9.2
Australia Unit 2016–17 2017–18 2018–19f 2019–20f 2017–18 2018–19f 2019–20f
Mine output kt 917 885 1,019 1,034 –3.5 15.1 1.5
Refined output kt 448 367 409 397 –18.0 11.3 –3.0
Exports
–ores and cons.c kt 1,752 1,988 2,200 2,336 13.5 10.7 6.2
–refined kt 413 316 375 364 –23.6 18.8 –2.9
–total metallic content kt 920 890 1 003 1 030 –3.2 12.6 2.7
Export value
–nominal A$m 7,569 8,426 9,958 11,691 11.3 18.2 17.4
–reald A$m 7,892 8,620 9,958 11,414 9.2 15.5 14.6
Notes: b In 2018 calendar year US dollars; c Quantities refer to gross weight of all ores and concentrates; d In 2018–19 financial year Australian dollars; f Forecast
Source: ABS (2018) International Trade, 5465.0; LME (2018) spot price; World Bureau of Metal Statistics (2018) World Metal Statistics; Department of Industry, Innovation and Science (2018)