The capital expenditure of global copper enterprises has been declining after reaching the peak in 2012-2013, and the capital expenditure of global copper enterprises is still in a low position in 2017-2020. According to the law of capital expenditure and copper production, it usually takes 3 ~ 4 years to change the peak of capital expenditure into the peak of new capacity. The low capital expenditure of copper enterprises after 2017 will affect the construction and expansion of copper mines in the medium term.

Although the current copper price is much higher than the incentive price for copper mining enterprises to develop new mine projects, some enterprises may speed up the project construction, but due to the decline of ore quality in the next generation of newly developed copper mines, and the current need for mines to comply with higher environmental and social standards will drive up the cost of time and money for new projects, which could take twice as long to build.

1. Global production of copper concentrates by 2020 affected by the epidemic

Chile, Peru and Congo accounted for 47 percent of global copper production in 2019, with most of the world's production concentrated in Chile, Peru and Africa. Since March 2020, the epidemic spread in Chile, Peru and Congo (DRC) and other major copper mining areas, forcing the local state of emergency, seriously affecting mine operations and production. Copper production in Chile and Peru declined in June, while major copper producers such as Rio Tinto, freeport and Vale lowered their production forecasts for the year compared with the beginning of the year. SMM statistics show that the outbreak directly caused by 2020 global copper concentrate production from the beginning of the planned production of nearly 460,000 tons. As a result of the outbreak, global copper production shrank in 2020, down nearly 1.4 per cent from 2019.

Global Copper supply is expected to pick up on the back of the start of new construction at large mines, the gradual release of capacity from expansion projects and the resumption of production at 2021 affected by the epidemic. According to Wood Mackenize, the world's new copper mine capacity (new project capacity + expansion of existing projects) will be 1,357,500 tonnes, including 1,251,500 tonnes of new copper concentrate capacity and 106,000 tonnes of new wet copper capacity, according to 2021. 2021 is expected to increase its global copper production capacity by 6.57 per cent year on year to 22.02 m tonnes. Add to that the estimated 287,000 tonnes of copper recovered from the effects of last year's outbreak, and 2021, the world's supply of copper, will rebound significantly.

2. There is still considerable uncertainty about global copper production

Although the 2021 has a lot of new capacity, but considering that 55% of the new capacity is located in Africa, Congo (DRC) , Botswana and Peru, Chile, and other areas of serious epidemic, vaccine coverage late, it is still uncertain whether the new mine project can be put into production smoothly and whether the new capacity can be released smoothly. In addition, 2021 is the biggest year for the expiration of contracts for global copper mines, according to Bloomberg, chile and Peru alone face labour negotiations over the expiration of contracts for copper mines with a total output of 4.665 million tons (such as the large copper mines of Chile as Chuquicamata and Escondida, and the large copper mines of Peru as Antamina and Cerroverde) , the current surge in copper prices will lead to higher demands from unions and others, raising the possibility of a strike that could eventually affect mine production. Members of the Lospelambres Union, a unit of Chile's Antofagasta Mining Company, went on strike in early March. Global copper supply remains highly uncertain due to the outbreak of the disease, labour negotiations and other factors, with the 2021 forecast to grow 4.11 per cent year on year to 21.49 m tonnes, according to the 2021.

While the supply of copper concentrates will improve in the face of a significant increase in production, given the significant depletion of the industry's copper ore stocks following the global shortage of copper concentrates in 2020, add in the 780,000 tonnes of new capacity added to the world's 2021 in the last two years alone, and the global supply of 2021 is expected to remain tight. Large domestic smelters and overseas mines have settled on a 2021 per ton processing fee of $59.50, the lowest since 2011, and recent shipments of South American copper concentrates to China have been hampered by weather, domestic spot copper concentrate TC continued to fall to $36.70/ton, also reflecting tight supply in the copper concentrate market. Global refined copper production is expected to rise 1.64 per cent year on year to 24.11 m tonnes on the back of a slowdown in copper feedstock and new domestic smelting capacity, compared with 2020,2021 said. 

Source: Non-ferrous Metal, EDITOR IN CHIEF: Huali