The Zhitong Finance App learned that Everbright Securities released a research report stating that domestic demand for home appliances was raised by 286,000 tons in 2024, and assuming a 4% growth rate of domestic air conditioning production in 2025 (the original forecast was 0%), the global refined copper supply-demand balance sheet was adjusted from 2/-140,000 tons in 2024/2025 to -39/- 640,000 tons. The gaps increased by 410,000 tons and 500,000 tons, respectively (and updated the 2023 annual report and 2024 production guidelines for some mines). The gaps account for about 1.4% and 2.2% of global demand. It is expected that the gap between copper supply and demand will gradually expand in 2024-2025, and copper prices above 12,000 US dollars/ton are expected to be achieved in 2025. We continue to be optimistic about investment opportunities for copper industry companies.
Related targets: The recommended rankings are Luoyang Molybdenum Industry (603993.SH), Zijin Mining (601899.SH), Western Mining (601168.SH), and Jin Chengxin (). It is recommended to focus on Tongling Nonferrous Metals (000630.SZ) and Minmetals Resources (01208). 603979.SH
The main views of Everbright Securities are as follows:
The highest cash cost of copper ore in 2023 is about 14,495 US dollars/ton, and the end of the cost curve is steep
1) Cash cost: According to Woodmac's statistics, the average cash cost of 1999 million tons of copper ore in the world in 2023 is about 4,350 US dollars/ton, and 90% fractional cash cost is SH103 US dollars/ton; at the same time, the cash cost of copper ore is steep at the end. The highest cash cost is about 14,495 US dollars/ton, which is about 2 times the 90% quantile cash cost. 2) Complete cost: According to Woodmac's statistics, the average complete cost of global copper ore in 2023 is about 6420 US dollars/ton, and the 90% quantile full cost is about 8,930 US dollars/ton.
NPV (net present value): Copper prices need to rise to 12000-14,000 US dollars/ton to stimulate potential supply growth
According to estimates by Everbright Securities, the average full cost of copper ore in 2023 is 6420 US dollars/ton, the investment intensity per ton of copper ore is 20,000 US dollars/ton, the mine life span is 15 years (including 3 years of infrastructure cycle, 50%/80%/100% capacity utilization rate after commissioning), a discount rate of 10%, and an income tax rate of 30% is calculated as the after-tax NPV for copper mines; the corresponding copper price needs to rise to 1,1896 US dollars/ton or more before more potential mines can be put into operation. If the full cost of the 90% quantile is calculated at 8930 US dollars/ton, the price of copper would need to rise to more than 14,320 US dollars/ton (none of the estimates take into account the maintenance capital expenses required for mining).
Maximum cost: If the highest cash cost is taken into account, the copper price is expected to rise to 14,500 US dollars/ton
Currently, the copper industry is in a period where supply is tight and demand in the downstream sector exceeds expectations. Copper prices have already entered a very high price-demand elastic zone, and slight changes in demand will lead to a rapid jump in copper prices. The copper industry will enter a shortage in 2024, and the shortage will expand further in 2025; theoretically, subsequent prices are expected to rise and exceed the cash costs of all existing production capacity, which is expected to rise to 14,500 US dollars/ton.
Risk warning: risk of continuous production with lost production capacity; risk of NPV calculation assuming too optimistic risk; risk that copper supply growth exceeds expectations, and downstream demand falls short of expectations.