The Status Quo and Forecast for China Copper …•Constrined by downward copper price and slow expansion of copper smelting/refining capacity, in the next 2 years, the growth rate

China Nonferrous Metals Forum 13th Oct. 2015

The Status Quo and Forecast for China Copper Industry

Li Yusheng China Nonferrous Metals Industry Association

London UK October 13, 2015

China Nonferrous Metals Forum 13th Oct. 2015 2

CONTENTS

China's copper industry review

1

China's copper market analysis in Jan.-Aug. 2015 2

China's copper market Forecast for 2015/2016 3


01 1


A Rapid growth in copper production

B Copper imports continued to grow

C Technology and equipment improved

D Refined copper consumption increased significantly



A Rapid growth in copper production

0

2000

4000

6000

8000

10000

12000

14000

16000

2000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Cu in Concentrate

Refined Cu

Cu Semis

Cu in Concentrate, kt Refined Cu, mlnt Cu Semis, mlnt 2000 598 1.371 1.597

2014 1741 7.649 14.97

CAGR 7.9% 13.1% 17.3%

Source: CNIA


0

2000

4000

6000

8000

10000

12000

2000 2014

1810.2

11821.0

0

100

200

300

400

500

600

2000 2014

124.7

584.7

0

1000

2000

3000

4000

2000 2014

634.6

3589.7


B Copper imports continued to grow

Copper concentrate * kt

Source: China Customs Note: * Gross weight

Copper blister kt

Refined Copper kt


1


C Technology and equipment improved

Flash smelting, Ausmelt, ISA process and enriched oxygen bottom-blowing smelting, and other advanced technology are widely used in copper smelting.

By the end of 2005, China's copper smelting capacity was 1.83 mlnt, of which, backward capacity was around 400 kt; by the end of 2014, copper smelting capacity reached 5.50 mlnt, of which, flash smelting capacity was 2.25 mlnt (“double flash” capacity 1.20 mlnt) , and most of the backward smelting capacity was phased out .




2014

……

2005

Source: CNIA ICSG

Refined copper consumption: China v.s. World

In 2000, China's refined copper consumption was 1.87 mlnt, accounted for 12.4% of the global total.

In 2014, China’s refined copper consumption reached 9.45 mlnt, accounting for 44.3% of the global total.

The CAGR of refined copper consumption was 12.3% during 2000-2014.




2014

……

2005

Remarks

Consumer goods:

refrigerator，air-conditioner,

freezer, door-lock, small

household applicance,

kitchen utensil, etc.

Machinery: locomotive,

construction

machinery,instruments, heavy

mining machinery, machinery

tool manufactruing, etc.

Source: CNIA

Refined copper consumption by sectors


01 2

China's Copper market analysis in Jan.-Aug. 2015

A Copper supply

B Refined copper consumption


01


Production and consumption slowed down

Smelting/Refining Capacity were still increasing, but some projects are delayed

Import of copper scrap, blister and refined copper decreased, that of copper concentrate was an exception

The refined copper consumption was weak, but the apparent consumption in the first 8 months saw slight growth

Inventory in bonded warehouse was falling

China’s copper market demonstrated the following characteristics in the first eight months:


01 2


A Copper supply--Production in January-August 2015

kt

Source: CNIA Note: Copper concentrate- metal weight, copper semis – gross weight

Jan-Aug 2014 Y-O-Y Jan-Aug 2015 Y-O-Y

Copper-in- Concentrate

1215.0 5.68% 1136.5 -4.98%

Refined Copper 4690.2 11.17% 5073.6 8.17%

Copper semis 11307.8 15.61% 11915.3 5.75%


01


A Copper supply--Copper imports in Jan - Aug 2015

In Jan.-Aug. of 2015, copper concentrate import reached 8.12 mlnt, with an increase of 11.4% yoy, as copper smelting capacity expansion in rencent years and higher TC/RC in 2015.

The SHFE/LME ratio rebounded in Q3 2015, refined copper import from bonded warehouse increased.

The refined copper import decreased, especially for bonded warehouse import reduced by 19.3% to 878kt.

Products 2014 2015

y-o-y Jan-Aug

Copper * concentrate Import 7291.6 8120.4 11.37%

Copper scrap Import 2462.9 2340.6 -4.96%

Copper blister/anode Import 407.5 341.0 -16.33%

Refined Copper

Import 2360.0 2200.6 -6.75%

Export 193.1 147.6 -23.59%

Source: China Customs * Gross weight

kt


01


B tment in Power Industry in Jan.-Aug. 2015

In the first 8 months, China's Refined copper apparent consumption was 7.126 mlnt, ticked up 0.42% year-on year, far lower than 17.70% in 2014.

Source: CNIA

kt Because • Production growth slowed down • Refined copper import dropped

• Macro economic growth lower than expectation • The output of major industrial products mostly saw decrease.

Jan-Aug 2014 Y-O-Y Jan-Aug 2015 Y-O-Y

Refined Copper Output 4690.2 11.17% 5073.6 8.17%

Refined Copper Net Import 2166.8 27.12% 2053.0 -5.25%

Refined Cu Apperent Consumption

7097.0 17.70% 7126.6 0.42%




Investment in Power Industry in Jan.-Aug. 2015

Soure：China Electricity Council

48.11

52.37

45

46

47

48

49

50

51

52

53

Jan-Aug 2014 Jan-Aug 2015

Newly Installed Power General Capacity

Yoy: 8.9%

Bln yuan Mln KW

0 50

100 150 200 250 300 350 400 450

Jan-Aug 2014 Jan-Aug 2015

172.2 192.3

229.6 226.2

Power generation Power grid

Yoy: 11.6%

Yoy: -1.5%


0



Major Industrial Products Output (copper usage) in January- August 2014-2015

Source: NBS

Products Unit January - August 2014 January - August 2015

Output yoy ％ Output yoy ％

Automobiles mln unit 16.35 9.9 15.48 -0.5 Power Equipments mln kw 96.92 13.1 81.48 -12.5 AC Motors mln kw 192.37 7.4 185.20 -6.4 Household Refrigerator mln unit 66.40 3.1 64.46 -1.3 Household Freezers mln unit 12.69 -1.8 14.29 0.4 Househoud Air Conditioners

mln unit 111.33 14.6 112.64 1.5

Transformer mln KVA 1093.87 1.6 1043.54 -1.2 Power Cables mln Km 34.88 7.9 34.82 -1.6

Communication Cables mln Km (double) 31.67 2.4 30.57 -2.2

Copper Semis mlnt 11.31 15.6 11.92 5.8


01 3

China's copper market Forecast 2015/2016

Mine copper Copper supply/demand balance

Smelting/refining capacity change


01 3


Mine projects, mainly in Yunnan and Tiebt, mine copper will see a net increase of 100 kt (metal content) capacity in next 2 years.

By the end of 2015, China’s copper smelting capacity will be 6.00 mlnt, and copper refining capacity will reach 10.41 mlnt, the capacity increase lower than expectation as capital strain and enviromental pressure.

In 2016, both smelting and refining capacity will see a net increase around 550 kt, lower than previous years.

China’s production of copper concentrate will see no much increase in next 2 years, and refined copper will grow at a rate of below 5%, and will remain a moderate growth in the future.

Refined copper consumption may continue to slow down, the power industry is the main driver in the future, China will still be a major contributor to global refined copper consumption.


01


Copper Mine

Copper mines: there are a good number of mines under construction, most of which are small scale ones. In 2015, no big mine comes on stream.

However, there is potential to grow in the future. in 2016, Shaxi Copper Mine in Anhui, Pulang Copper Mine in Yunnan, will come on stream.

There are also a couple of big mines to be developed or under construction, Qulong Copper Mine and Xiongcun Copper Mine in Tibet, Tuwu Copper in Xinjiang, etc.

Mine copper output in 2015 will be 1.70 mlnt, with a decrease of 2.4% yoy, and 1.80 mlnt, with an increase of 5.9% yoy.


01

China's copper market Forecast 2015/2016 Copper smelting capacity change in 2015-2016

Source: Antaike

Copper Smelting

•The capacity increase is lower than previous forcast, may be even lower, because some projects have postponed to come on stream as scheduled, and some projects will suspend production, because of capital tight or enviromental pressure.

•By 2016, the smelting capacity and refining capacity will further grow to 6.55 Mt and 10.96 Mt, respectively, with a increase of 550 kt for both smeling and refining. or even lower if some projects are delayed or some are closed due to environmental problem and lower copper price.

Smelter Year of commissioned

2015 kt

2016 kt

Huludao Dongfang Copper 2010 60 40

Dongying Fangyuan Copper 2015 40 100

Xinjiang Wuxin Copper 2013 50

Yantai Penghui -60

Qinghai Copper 2016 40

Zhongtiaoshan North Copper 2014 10

JInchuan(Guangxi) 2014 200 80

China Minmetals Hunan 2016 40

Zhejiang Heding Copper 2015 40 40

Xinjiang Xinhui Copper 2013 60

GUangxi Nanguo Copper 2016 50

Henan Yuguang Gold & Lead 2014 40

China Gold Zhongyuan Smelter

2015 50 100

Liaoning Yuandong Copper 2014 60

Feishang Copper 2010 30

Total - 580 490


01


Supply and Demand

Supply •Constrined by downward copper price and slow expansion of copper smelting/refining capacity, in the next 2 years, the growth rate of China's copper output will continue to slow down, ageraging at 5% year-on-year. •Refinded copper import will show a downward trend.

Demand •The Chinese economy has entered a state of "new normal", the gear of growth is shifting from high speed to medium-to-high speed, China's refined copper consumption will no longer maitain high growth rate in the future, but a moerate pace. •In 2015-2020, Chinese government will invest 2 trillion RMB in upgrading power distribtution network, it will be the main driver for copper demand in China. •The real estate is hard to have good performance, vehicle purchase quotas in some cities and enviromental issue will impact the vehicle production, copper demand in transportation sector will slow down; constrined by high inventory for air-conditioner, the copper demand growth in ACR will be lower.



Source: CNIA Antaike*

Refined copper supply/demand

2015 Y-O-Y 2016 Y-O-Y

Output 8,200 7.2% 8,600 4.9%

Import* 3,159 -12.0% 3,050 -3.5%

Export* 270 1.5% 260 -3.7%

Demand 9,850 4.2% 10,250 4.1%

Balance 1,239 1,140

kt


In summary China’s copper industry experienced fast growth in 2000-2014, reflected by production, consumption, and improvement of technology & equipment. The expansion of smelting/refining capacity drives up demand for copper raw materials.

At the same time, China’s copper industry has entered a “new normal”, copper production and consumption will be in a medium-high level growth rate, from two-digit growth rate to one-digit growth rate.

China's refined copper surplus will decrease as the financing import weakens.

In 2015/2016, copper smelting/refining capaicty will continue to increase；constrined by domectic copper concentrate production, copper concentrate supply/demand gap continues to widen, copper concentrate import will still increase.

The “One Belt and One Road Initiative" will give China more options in raw materials import, in terms of suppliers and type of raw materials (copper concentrate, copper blister or copper cathode)


Thank you for your attention!

The Status Quo and Forecast for China Copper …•Constrined by downward copper price and slow expansion of copper smelting/refining capacity, in the next 2 years, the growth rate

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