Pandemic affects 2020 copper usage forecast

As published in Copper Worldwide Vol 10 No 2 issue available now, the latest ICSG Insight into the ‘Global Impact of COVID-19 Related Lockdowns on Industrial Uses of Copper and Recycling’ released in May says the first half of 2020 will be remembered by a strong deterioration in the downstream demand for copper.

Copper semis

Global GDP is expected to contract 3% after a forecast of growth over 3% in January by Intergovernmental organisations. The impact on copper demand only in Q1 2020 is revealed in the fall in use of copper wire rod, which represented 56% of all copper end uses worldwide in 2019. In Q1 2020 the Asia Pacific region was the most affected, with a 25% fall in sales of wire and cable. In the European Region and MENA, sales fell 6% in Q1, but Q2 expectations are pointing to a 2 digit annual contraction. In North America the first quarter was good with wire rod demand up 4%, but expectations were not so good for Q2. In Latin America demand fell 15% in Q1 via commodity price adjustments.

China’s automobile production fell 45% y-o-y in Q1 2020, whilst electric grid investment fell 27%, air conditioner output fell 28%, and refrigerator output fell 20% respectively. In the period 1-10 May 2020, South Korean exports fell 46% y-o-y, and imports fell 37%. Japanese imports of scrap fell 36%, and less fabricated copper products were exported in Malaysia, Russia and Spain in the first quarter. There was a contraction of 29% in Italian industrial production in Q1, followed by France (-16%), Germany (-14%) and Spain (-13%), with European copper use expected to fall in Q2 2020. Exports of fabricated copper and alloys fell in Q1 in Belgium, Poland and Germany. In the US, housing starts fell 9% in Q1 and in Q2 the fall might be in 2 digits, whilst household spending in transport fell 33% in Q1.

Other streams

Copper smelters out of mining countries are facing a massive shortage of concentrates in H1 2020. That eventually can be solved in part if concentrate stocks in South America are exported. Total y-o-y Q1 exports of copper concentrates fell from Chile (-8%), Peru (-10%), from Australia (-8%) and Brazil (-16%). Ports in Peru closed all of April, and not all mines operated at low capacity for stocks. Global trade of copper scrap fell 400 kt in Q1, but scrap availability fell 550 kt as lower prices hit smelter and fabricator demand. Traders of recycled copper, scrap and copper waste left the market when prices fell. Imports of copper scrap to China fell by 37% in Q1 on ports closures, with Germany’s imports down 16%, and a 36% fall in Japan and Malaysia. Refined copper output produced from concentrates is sustaining the supply of refined copper in H1 2020. It will be difficult for global copper use to return to the 29.9 Mt reported in 2019. Preliminary estimates for the drop in 2020 global end use of copper are between -1,4 Mt and -2.7 Mt in the less optimistic scenario.

Upstream

The ICSG Secretariat Briefing Paper - No 18 (Insight) was released on 21 May entitled ‘The Impact of the COVID-19 Pandemic on World Copper Supply’. The April meetings of the ICSG were cancelled, so the spring forecast was deferred. The Insight is an update on the copper supply and demand impact and on ICSG’s last forecast made in October 2019. In summary, global mine production in 2020 is likely to be about 950,000 tonnes copper lower than the ICSG forecast in October 2019. World output is now expected to decline by about 3% compared to 2019. Global refined output will be approximately 1.1 Mt lower than the Group forecast in October. Consequently, world refined production is now expected to remain unchanged for the second consecutive year.

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