sector iefi 61 - dbs bank our regional automotive analyst, rachel miu, expects the global...

DBS Group Research • October 2018DBS Asian Insights61n

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SECTOR BRIEFING

Copper And Its Electrifying Future

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DBS Asian Insights SECTOR BRIEFING 6102

Copper And Its Electrifying Future

Produced by:Asian Insights Office • DBS Group Research

go.dbs.com/research @dbsinsights [email protected]

Goh Chien Yen Editor-in-ChiefMartin Tacchi Art Editor

Eun Young LEEEquity [email protected]

Yi Seul SHINEquity [email protected]

Special thanks to Rachel Miu for her contribution to the report

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Executive SummaryIntroductionBullish on Long Term Copper PricesCopper Demand’s New Growth Path Over the Next DecadeElectrifying Society: A Key Driver of Copper DemandCopper Supply Lagging DemandAppendix I Global Copper Sector Value Chain

Appendix II China Copper Sector Value Chain

Appendix III Top copper mines and refiners

opper is set for an electrifying future. Already the metal of choice wherever electricity is needed, copper is to experience demand at growth rates not seen in previous decades, as the world moves towards the electrification of energy. In particular, the electrification of transportation will be a mega-trend.

Electric vehicles use copper more intensely than internal combustion engine vehicles (ICEVs) – a battery-powered electric vehicle contains four times as much copper as an ICEV (80kg versus 20kg). Renewable energy also uses significantly more copper per megawatt hour of power generated than for coal or nuclear power. With the electrification of energy, we expect demand for electricity to outstrip the growth in total primary energy demand going forward. Already, 72% of copper consumption is in the power and utilities sector, and in electrical products. We forecast that demand will grow at an annual 3.1% until 2022, exceeding growth over previous decades.

Our regional automotive analyst, Rachel Miu, expects the global electric-vehicle market to grow 22% annually to 2030, led by China’s 25% market growth. We expect copper demand from electric vehicles to rise from 208,000 tonnes in 2017 to 1.91mn tonnes in 2030, up 19% annually. Copper consumption from electric vehicles, estimated at 0.9% of the global total in 2017, will rise to 8.2% of 2017’s total copper demand in 2030.

Between 2017 and 2040, the International Energy Agency (IEA) forecasts an average global net capacity addition of 74GW for solar photovoltaic, 50GW for wind and 36GW for all other renewables, concluding that 635,000 tonnes of copper demand (3% of global copper consumption in 2017) will be generated every year on average.

Copper demand is also set to experience an overall boost in Asia. Historically speaking, copper consumption peaks a second time as emerging economies mature and develop. In our analysis, we see that the United States and Japan had one peak at 11kg/capita, when their gross domestic product (GDP) was around US$20,000-30,000 per capita, and a second peak at US$40,000-50,000 GDP per capita. This suggests huge potential for copper consumption in such countries as China and India, which have yet to hit their second consumption peaks. China, the world’s biggest copper consumer at 50%, has a per capita copper consumption of just 8.2kg while India was at a mere 0.4kg in 2017.

Meanwhile, supply is set to remain tight.

Executive Summary


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Growth in the global copper mine supply is expected to decelerate due to structural challenges. Production costs are rising for existing mines on systematic grade declines and resource depletion, while tepid exploration in recent years have limited discoveries. Net cash cost at mines globally in 2017 is about three times the levels in 2000, while the copper ore grade at mines in Chile, world’s largest producer, has declined by 0.76ppts to 0.65% in 2016, from 1.41% in 1999. Of the 20 biggest copper mines globally, only four began production in the 21st century. The latest newly discovered mines are mostly in Latin America and sub-Saharan Africa, where political and social stability is weak. We forecast that global mine production will grow at a CAGR of 2.9% during 2017-2022, slower than the 4% achieved over 2010-2016.

In 2018, refined copper output production is expected strongly recover, compared to 2016-2017 when weather and labour issues disrupted mines and flattened output. However, output will still grow at a slower pace than demand. Meanwhile, China’s ban on low-grade copper scrap imports has introduced uncertainties for secondary refined copper production, and the prognosis remains unclear, given the stricter environmental regulations on smelters. We expect a 2.6% CAGR in global refining capacity and a 3% CAGR in global refined copper supply in 2017-2022, driven by China and India.

Given strong demand growth, we expect a copper shortage over the medium term. The global copper market last registered a surplus in 2015, which turned into a deficit of 326,000 tonnes in 2016, and remained 262,000 tonnes short in 2017. In 2018, we expect the deficit to narrow to 136,000 tonnes. We expect shortages until 2022, with the deficits increasing. Accordingly, we expect London Metal Exchange (LME) copper prices to generally trend up, subject to fluctuations from market dynamics such as warehouse inventory, supply disruptions stemming from weather and labour strikes, and macroeconomic indicators.

We forecast that demand will grow at an annual 3.1% until 2022, exceeding growth over previous decades

rom at least 10,000 years ago, copper, one of the first metals harnessed by humans, has been used to produce everything from coins to ornaments. Today, copper and its alloys are used to produce a range of products necessary to modern life, from cars to electronics. Accordingly, copper demand has grown in line with global

economic growth, which makes copper a reliable metal with which to track business cycles over the long term.

We believe that copper consumption is entering a new growth phase driven by an “electrifying society”. With the electrification of energy, we expect demand for electricity to outstrip the growth in total primary energy demand going forward. The production, distribution and transmission of all that power will require a great deal of copper. In particular, the electrification of transportation will be a mega-trend. Copper, with its superb electrical conductivity and lack of price-competitive substitutes, will be the key metal wherever electricity is used. Already, 72% of copper consumption is in the power and utilities sector, and in electrical products. We forecast that demand will grow at an annual 3.1% until 2022, exceeding growth over previous decades.

Electric vehicles will be a key driver of copper demand. The transition to electric vehicles (EVs) from internal combustion engine vehicles (ICEVs) is inevitable despite controversies over the speed of implementation. Our regional automotive analyst, Rachel Miu, expects the global electric-vehicles market to grow 22% annually to 2030, led by China’s 25% market growth, which is bolstered by government policy. With a battery-powered electric vehicle (BEVs) containing four times as much copper as an ICEV (80kg versus 20kg), the red metal is expected to emerge a big winner from the electrification of light-duty vehicles.

We expect copper demand from electric vehicles to rise from 208k tonnes in 2017 to 1.91mn tonnes in 2030, up 19% annually. Copper consumption from electric vehicles, estimated at 0.9% of the global total in 2017, will rise to 8.2% of 2017’s total copper demand in 2030.

Renewable energy growth is expected to accelerate copper demand growth. Renewable energy uses copper more intensely than conventional power generation – copper usage per megawatt hour of offshore wind and solar power generation is significantly higher than that for coal or nuclear power generation. Based on International Energy Agency (IEA) forecasts on global average annual net capacity addition between 2017-2040 (74GW for solar photovoltaic, 50GW for wind and 36GW of all other renewables), 635k tonnes of copper demand (3% of global copper consumption in 2017) will be generated every year on average until 2040.

FIntroduction


Copper demand from renewable energy


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Copper demand in EV

Source: IEA, DBS Bank

Source: International copper alliance; IDTechEX; BYD, DBS Bank

0%

2%

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(k tonnes)

Copper demand from Hybrids and EVs

% of 2017 demand

195

370

158

175110

90

0

100

200

300

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2010-2016 2017F-2040F

(k tonnes)Other renewables Wind Solar

In our analysis of peak copper consumption, we see that developed economies such as the United States and Japan had one peak at 11kg/capita, when their gross domestic product (GDP) was around US$20,000-30,000 per capita, and a second peak at US$40,000-50,000 GDP per capita. This feature distinguishes copper from other metals and brightens its demand outlook. We are especially optimistic on copper demand growth in the emerging markets. China, the world’s biggest copper consumer at 50%, has a per capita copper consumption of just 8.2kg while India was at a mere 0.4kg in 2017.

Copper consumption per capita by country

Copper consumption per capita for China & India

Source: Bloomberg Finance L.P., DBS Bank


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(kg/capita)

(kg/capita)

Growth in the global copper mine supply is expected to decelerate as existing mines experience higher production costs from systematic grade declines and resource depletion, while tepid exploration activities in recent years limit new discoveries.

Net cash cost at mines globally in 2017 is about three times the levels in 2000, while the copper ore grade at mines in Chile, world’s largest producer, has declined by 0.76ppts to 0.65% in 2016, from 1.41% in 1999. Of the 20 biggest copper mines globally, only four have begun production in the 21st century. The latest newly discovered mines are mostly in Latin America and sub-Saharan Africa, where political and social stability is weak. We forecast that global mine production will grow at a CAGR of 2.9% during 2017-2022, slower than the 4% achieved over 2010-2016.

Copper is refined to the 99.99% cathode form through three broad methods: primary production from copper concentrate or solvent extraction and electrowinning (SX-EW), and secondary production from scrap. These accounted for a respective 67%, 15% and 18% of global total refined copper production in 2017.

There is strong refining capacity growth in China, but ore supply will remain a key determinant of refined metal production going forward. We expect 2.6% CAGR growth in global refining capacity and 3% CAGR growth in global refined copper supply in 2017-2022, driven by China and India.

In 2018, production is expected to outstrip capacity increases and drive the strong recovery of output, compared to 2016-2017, when weather and labour issues disrupted mines and

Copper supply

World copper mine capacity vs utilisation

Source: Cochilco, DBS Bank

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(%)(m tonnes) World Mine Capacity

Mine Capacity Utilisation (R)


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flattened output. However, output will still grow at a slower pace than demand, keeping the copper market tight. Meanwhile, China’s ban on low-grade copper scrap imports has introduced uncertainties for secondary refined copper production, and the prognosis remains unclear, given the stricter environmental regulations on smelters.

After ending 2017 30.1% higher at US$7,157 per tonne, the London Metal Exchange (LME) spot copper price has retreated in 2018. As of end-Aug, copper price is down by 16% amid the escalating trade war across the globe and concerns over a potential economic slowdown as a result.

Both fundamentals and sentiments put pressure on copper prices last year as global major mines faced disruptions and were expected to continue facing them in 2018 with a significant portion of global mine output subject to the renewal of labour contracts. However, as the year progresses, the market is factoring in a smaller risk to copper supply YoY and in line with this, we expect a positive growth in copper ore and metal supply this year. Meanwhile, trade war concerns would continue to weigh on copper prices in 2H18. All in all, we forecast copper price to average at US$6,471 per tonne, 5% higher y-o-y.

Given strong demand growth, we expect a copper shortage over the mid-term. The global copper market last registered a surplus in 2015, which turned into a deficit of 326k tonnes in 2016, and remains 262k tonnes short. In 2018, we expect the deficit to narrow to 136k tonnes. We expect shortages until 2022, with the deficits increasing. Accordingly, we expect LME copper prices to generally trend up, subject to fluctuations from market dynamics such as warehouse inventory, supply disruptions stemming from weather and labour strikes, and macroeconomic indicators. We forecast annual average LME copper prices to be on an uptrend in medium term.

Copper is one of the most traded commodities around the world. Market participants tend to trade on sentiment and expectation rather than fundamentals, given the time lag in the release of data on actual demand and supply. So, copper prices are affected by various economic indicators, and news and money flows in relation to the financial markets.

Copper prices are strongly correlated with the global economy and generally swing with the business cycle, as seen from the OECD system of Composite Leading Indicators (CLI). Commodity prices have an obvious negative correlation with the US dollar and copper is no exception.

Copper prices


LME copper price & global refined copper market balance



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ur long-term outlook is that the copper market will remain tight with strong demand growth. Copper prices will be supported long term by solid global demand from electric vehicles (EVs), renewable energy and economic growth.

China, which accounts for 50% of global copper demand, will keep demand growth bolstered by its power and construction sectors, which account for approximately 46% and 9.4% of copper end-use, respectively. Meanwhile, the growing market for electric vehicles (EVs) and the shift to renewable energy systems will generate fresh demand for copper.

Also, demand from fast-growing developing countries, especially India and within ASEAN, remains strong and should continue to grow as their infrastructure investments, including on power supply, rise. In particular, electric vehicles are projected to consume 8.2% of 2017’s total copper demand in 2030, from a mere 0.9% in 2017. All in all, we forecast that global copper demand will register a CAGR of 3.1% in 2022 from 2017.

We do not expect the supply of refined copper to keep pace with demand. Over the coming decade, primary output from currently operating mines is set to fall, due to the decline in ore grades endemic to the porphyry-type resource base that dominates global supply. With weak metal prices in the wake of the global financial crisis, investment in mines also became inactive.

In addition, China’s latest restrictions on copper scrap imports should significantly reduce the supply of secondary refined copper for the world’s largest copper consumer, with impact estimated to be equivalent to a 2% reduction in global copper production in 2018. We expect refined copper supply to register just 3% growth annually for the next five years.

We expect copper prices to be boosted by a supply shortage in mid-term. Global refined copper supply last registered a surplus in 2015 before a deficit of 326k tonnes in 2016, which narrowed to 262k tonnes in 2017. In 2018, we expect the shortage to further shrink to 136k tonnes. However, we expect the copper market to stay in shortage until 2022, with bigger deficits.

Accordingly, we expect London Metal Exchange (LME) copper prices to generally trend upwards, with fluctuations influenced by market dynamics, such as warehouse inventory levels,

Demand solid

Supply lagging


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Bullish on Long Term Copper Prices


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supply disruptions stemming from weather or labour strikes, and macroeconomic indicators. We forecast annual average LME copper prices to be on an uptrend in medium term.

Copper prices affected by factors beyond fundamentals Copper is one of the world’s most traded commodities. Copper traders tend to trade on sentiment and expectation rather than fundamentals, given the time lag in the release of data on actual demand and supply. Considering the active trading activities of copper through platforms such as LME, this leads to price movements that can be divergent from market fundamentals. For instance, annual average copper prices fell after 2011 despite the refined copper deficit widening every year from 2012 to 2014. During this period, we note that sentiment on metals weakened along with signs of China’s economic growth turning sluggish.

Copper prices are affected by various economic indicators, news and money flows in the financial markets. Generally, copper prices are strongly correlated to global economic performance and hence, the global purchasing managers’ index (PMI), as manufacturing activity directly affects metal demand. However, during 2012-2014, this correlation was outweighed by negative sentiment due to copper oversupply and the demand slowdown in China, resulting in copper prices moving sideways despite a recovery in the OECD system of Composite Leading Indicators (CLI), usually a precursor of a turning point in the business cycle.

Prices for copper, as well as for other LME metals, also generally move with interest rates when higher rates imply an improving business cycle. An appreciating US dollar is likely to have a negative impact on copper prices, given the obvious negative correlation between the greenback and commodity prices.

Global copper supply/demand & price forecasts

(k tonnes) 15 16 17 18F 19F 20F 21F 22F

Copper mine production 19,450 20,429 20,278 20,927 21,534 22,150 22,728 23,408

Yoy % 4.6% 5.0% -0.7% 3.2% 2.9% 2.9% 2.6% 3.0%

Refined copper production 23,032 23,092 23,225 24,113 24,790 25,480 26,153 26,862

Yoy % 2.5% 0.3% 0.6% 3.8% 2.8% 2.8% 2.6% 2.7%

Copper consumption 22,893 23,418 23,487 24,249 25,060 25,813 26,572 27,345

Yoy % 0.6% 2.3% 0.3% 3.2% 3.3% 3.0% 2.9% 2.9%

Market balance 139 (326) (262) (136) (271) (334) (419) (482)

LME copper price (US$/tonne)

5,495 4,863 6,166 6,471 6,425 6,562 6,653 6,790

Yoy % -19.9% -11.5% 26.8% 4.9% -0.7% 2.1% 1.4% 2.1%


Since 2005, copper has plunged to as low as US$2,770 per tonne on 24 December 2008, pushed down by the global financial crisis. It has also jumped to as high as US$10,148 per tonne on 14 February 2014, driven by a weak US dollar, and Cyclone Yasi hitting mine output at major producers BHP Billiton, Xtrata and Rio Tinto after two years of shortages. Excluding outliers, the copper price band was US$4,500-8,500 per tonne, with price volatility the second lowest among LME-traded metals.

Base metal prices at a glance (2005 – 2017)

As of 31 Aug 2018Source: Bloomberg LLP, DBS Bank

LME Spot Price (US$/tonne)

Aluminium Copper Zinc Lead Nickel Tin

Maximum 3,292 10,148 4,620 3,980 54,200 33,255

Date registered 11/07/2008 14/02/2011 25/05/2006 15/10/2007 16/05/2007 11/04/2011

Minimum 1,254 2,770 1,042 824 7,710 5,990

Date registered 24/02/2009 24/12/2008 12/12/2008 15/07/2005 11/02/2016 21/11/2005

Average 2,074 6,523 2,253 1,981 18,085 17,752

Standard Deviation (SD) 400 1,570 673 534 8,124 5,587

SD/Average 19.3% 24.1% 29.9% 27.0% 44.9% 31.5%

Volatility (daily) 1.2% 1.4% 1.6% 1.8% 1.9% 1.5%

Price at Financial Crisis 1,254 2,770 1,042 880 9,450 9,775

2017 average 1,969 6,166 2,896 2,317 10,411 20,105

2016 average 1,605 4,863 2,095 1,872 9,609 18,006

2015 average 1,661 5,495 1,928 1,784 11,807 16,070

Change in price (%)

2017 (end) y-o-y 30.80% 30.10% 29.10% 25.70% 22.50% -5.80%

2017 (average) y-o-y 22.70% 26.80% 38.20% 23.80% 8.40% 11.70%

2016 (end) y-o-y 13.70% 17.00% 60.20% 10.20% 15.50% 44.50%

2016 (average) y-o-y -3.40% -11.50% 8.60% 4.90% -18.60% 12.00%

LME Stock (k tonnes)

At 2017 end 1,102 202 182 142 368 2.2

At 2016 end 2,205 322 428 195 371 3.7

At 2015 end 2,895 236 464 192 441 6.1

At 2014 end 4,210 177 692 222 413 12


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Price muted in 2018 Copper prices were up by 27% in 2017, fuelled by supply disruption. Copper prices recorded a seven-year low of US$4,311 per tonne in Jan 2016 and moved sideways until the US presidential election on November 8 which caused the metal to gain 11.4% in just two days, backed by growing optimism about metal demand on massive infrastructure spending.

After that, the copper price rose by another 30.1% in 2017, averaging 26.8% higher YoY (2016 average: US$4,863 per tonne; 2017: US$6,166 per tonne). Copper’s outstanding performance in 2017 can be attributed to 1.) an overall strengthening of base metal prices throughout the year on the global economic recovery, 2.) mine supply disruptions such as the 44-day labour strike (February-March 2017) at BHP’s Escondida mine in Chile, the world’s biggest copper mine accounting for 5% of global mine production in 2016, and 3.) China’s solid economic performance despite earlier worries of its slowdown affecting metal demand. The July 2017 news of China banning low-grade copper scrap imports from 2018 also helped to push the price higher in 2H17.

Copper prices & global manufacturing PMI

Copper prices vs the dollar index

Copper prices & OECD CLI

Copper prices vs US 10-year Treasury yield

Sources: Bloomberg Finance L.P., DBS Bank

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Copper priceGlobal Manufacturing PMI

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9596979899100101102103

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(k tonnes)(US$/tonne) LME warehouse stockLME Copper Price


We expect supply to ease in 2018 with more primary refined products available. In 2017, a series of planned and unplanned shutdowns at major smelters and lower output at solvent extraction and electrowinning (SX-EW) plants significantly reduced primary refined production in major producers such as Chile, Japan and the US, leading to world growth of only 0.7%.

In 2018, the expected recovery of smelter production, the restarting of SX-EW capacities, and adequate availability of concentrates will support a 6.2% growth in primary refined output. This will more than offset an anticipated 7.2% decline in secondary refined production (from scrap) due to China’s scrap import restrictions. All in all, total refined copper supply is estimated to grow by 3.8%.

The copper price rally seen over 2H17 is losing steam in 2018 with signs of faltering Chinese demand growth. As of end-Aug, LME copper price is down 16% to date on global trade war issues and a potential economic slowdown resulting from it. All in all, we expect copper to average 5% higher y-o-y at US$6,471 per tonne in 2018. In 2019, copper prices are likely to perform better with supply growth constrained by tightness in concentrate availability.

LME copper price & stocks



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LME copper price & global refined copper market balance:



rom at least 10,000 years ago, copper, one of the first metals used by humans, has been used to produce everything from coins to ornaments. Today, copper and its alloys are used in the production of a range of goods necessary to modern life, from cars to electronics.

Copper is often viewed as a good proxy for the global economic conditions. Accordingly, copper demand has been growing in line with global economic growth, which makes copper a good metal to represent economic cycle. Backing this, the growth trend in global refined copper demand and global GDP growth in the past 55 years display a decent positive correlation. Since 1960, the copper consumption has grown 2.8% annually slightly lower than annual world GDP growth rate of 3.5%.

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Copper Demand’s New Growth Path Over the Next Decade


Global refined copper demand growth vs Global GDP growth

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Global GDP growth y-o-y


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The twin peaks of copper consumptionCopper consumption in a country tends to increase along with economic growth at the initial phase. In the US and Japan, copper consumption reached its first peak at 11kg/capita, when gross domestic product (GDP) per capita was around US$20,000-30,000. We see this as rising demand for copper-intensive activities or products, such as investment in infrastructure and electronics, as the country gets richer. This consumption then wanes until the replacement demand pushes it up again. In US and Japan, copper consumption reached the second peak at US$40,000-50,000 GDP per capita. With key developing countries such as China and India yet to reach even the first peak, we expect future growth in copper demand to be well supported.



Global refined copper demand vs Global GDP

Copper consumption per capita for the US & Japan

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Copper consumption peaked at US$30,000 per capita GDP in major developed countries. The peak consumption analysis in major countries is in line with our prior thesis (see table below). These countries hit peak copper consumption in1991-2010, averaging 11.5kg of copper consumption per capital. Their urbanisation rates were over 67%, averaged 77.6%, with average GDP per capita at c.US$29,000. Also per capita power consumption was up to 8,266KW and contribution of the added value of the tertiary industry to GDP registered over 58%, and averaged at 68.8%. At the peak of copper consumption, the economic environment suggests the widespread usage of copper across industries in daily life.

Copper consumption in US & Japan

Peak copper consumption in major countries


Source: Antaike, World Bank, Bloomberg Finance L.P., DBS Bank

Peak year

Urbanisation rate %

Tertiary industry to GDP

%

Power consumption

per capita KWH

GDP per capita US$

Peak consumption

k tonnes

Total population

millions

Cu consumption per capita kg

US 2000 79 75 13,671 36,488 3,025 282 10.7

Germany 2006 73 69 7,174 35,400 1,398 82 17.1

Japan 1991 79 67 7,975 37,154 1,613 127 12.7

S.Korea 2004 81 59 7,830 15,922 940 48 19.6

Italy 2006 68 70 5,834 31,800 801 59 13.6

France 2000 77 75 7,238 21,800 574 61 9.4

Spain 2010 71 67 6,026 34,674 344 46 7.5

UK 1997 81 71 5,909 25,266 408 58 7.0

Canada 2006 80 66 17,235 31,825 301 32 9.4

Australia 2002 88 70 10,813 20,071 188 20 9.6

Average 78 69 8,971 29,040 11.6

China (2017) 58.5 51.6 4,036* 8,123* 11,790 1,404* 8.4


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(k tonnes) US Japan

Copper consumption by country (2000)




Huge consumption growth potential in

developing countries

US 20%

China 12%

Japan 9%

Germany 9%South

Korea 6%

Italy 4%

Taiwan 4%France 4%

Mexico 3%Belgium 2%

Others27%

In the conventional aspect of demand, the outlook is also promising. China, the world’s biggest copper consumer (50%), is transforming into a consumption-driven economy, which should boost copper demand across a range of end-use sectors, including for automotives, smart technology products, and household appliances like air-conditioners. In addition, the growth of urban consumers and infrastructure investment in India and the ASEAN economies will be a major driver of copper demand growth over the next few decades.

China: intense consumerSince 2000, China’s copper consumption has been grown rapidly in line with industrialisation.

In 2017, this reached 8.4kg per capita, an 11% annual growth since 2000. This level of consumption is similar to what developed economies recorded when they grew to about c.US$20,000 per capita GDP, a level at which China is not. This could be interpreted as China’s higher intensity for copper consumption, as its economy has grown by focusing on manufacturing industries and fixed-asset investment.


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China 50%

US 8%Germany 5%

Japan 4%South Korea 3%

Italy 3%Brazil 2%

Taiwan 2%India 2%

Turkey 2%

Others19%

China 50%

US 7%Germany 5%

Japan 4%South Korea 3%

Italy 2%Brazil 3%

Taiwan 2%

India 2%

Others22%

Thanks to strong demand growth, China now consumes 50% of the world’s copper, as of 2017, up from 12% in 2000. Power made up 50% of China’s total copper demand in 2016, followed by air-conditioning and refrigeration (15%), transportation (10%), construction (9%), and electronics (7%).

According to Antaike, the research arm of the China Nonferrous Industry Association, China’s copper consumption peak will come after 2027 and hit more than 10kg per capita.

To support the projection, Antaike believes that China can 1.) reach US$16,000 per capita GDP by around 2027, closing gap with industrialised countries, 2.) exceed 10kg per capita copper consumption by around 2030, 3.) its tertiary industries can contribute to 59% of its GDP, and that 4.) by about 2031, China can grow its per capita power consumption to 7,534kW per hour, about the middle level in developed countries.

With the growing use of electric vehicles in China set to take a key role in copper demand growth for next decade, we forecast that Chinese copper demand will grow by a CAGR of 3.1% by 2022.

India: early-stage consumerIn 2017, the copper consumption per capita in India was a mere 0.4kg, implying huge growth potential. India’s GDP per capita was US$1,983 which is ¼ of China’s, while its population, at 1.32bn, was slightly lower than China’s 1.40bn. In light of India’s economy entering a phase of rapid growth, we forecast that copper consumption in India will post one of the world’s strongest growth rates, at 6.2% during 2017-2022.

China copper consumption by usage (2016)

Source: Antaike, DBS Bank

Power50%

Air conditioning refrigeration

15%

Transportation10%

Construction9%

Electronic7%

Others9 %


What is copper used for? Electricity, mainlyCopper is the most conductive base metal in the world, with ideal properties such as strength, ductility, corrosion-resistance and energy efficiency. It is widely used in electric wires, power cables, and other electronic equipment. Power utilities and electrical products together account for more than 70% of copper consumption globally. Substitution risk is very limited, as it is not cost effective to use silver or gold, the world’s first and third most conductive elements, instead of copper, which is the second most.

Demand for copper will brighten with the electrification of energy demand, which we expect to outstrip the growth in total primary energy demand going forward. The production,

Copper consumption per capita by country

Copper consumption in Asia

Copper consumption per capita for China & India


0

2

4

6

8

10

12

14

0 10000 20000 30000 40000 50000 60000

GDP per capita(US$, constant)

USA Japan China India

0

1

2

3

4

5

6

7

8

9

0 1000 2000 3000 4000 5000 6000 7000 8000

GDP per capita(US$, constant)

China India

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

00 02 04 06 08 10 12 14 16 18F 20F 22F

(k tonnes) Other IndiaTaiwan South KoreaJapan China

(kg/capita) (kg/capita)


23

distribution and transmission of all that power will require a great deal of copper. As will the growth of the electric vehicle market.

Copper is also used in construction, to make plumbing, taps, valves and fittings. It is a preferred building material and should remain so, thanks to its advantageous properties –as it does not burn, melt or release toxic fumes in case of fire. Also, copper is antimicrobial, naturally resisting pathogens and preventing diseases from spreading; for example, copper tubes help protect water systems from potential bacterial infection. Accordingly, copper demand will grow following With Asia’s urbanisation and the need for more buildings, copper demand will grow as high rising commercial and residential building requires more consumption of copper.

Another use of copper is in coins and ammunition, which was responsible for 10% of copper demand in 2016. Copper’s malleability and anti-bacterial properties – coins pass many hands – make it an ideal coinage metal. According to the International Copper Study Group (ICSG), one cent and five cent US coins contain 2.5% and 7.5% of copper respectively, while other coins contain a pure copper core with 75% copper face; the 10,20 and 50 euro cents coins consist of 89% copper. However, we expect technological advancements in electronic payment to threaten demand for coins, and so demand for copper for coinage to fall according.

New growth path for copper demand Global copper demand has grown at 2.5% annually since 1970, with 2000s and the period of 2010-2017 registering the strongest demand growth of 2.8% each. Particularly in the 2000s, growth was dampened as demand from US and Europe flagged during the global financial crisis, offsetting a whopping 14.7% annual growth from China. In 2010 to 2017, demand recovery was led by the developed world as China’s growth decelerated to 6.9%

Global copper consumption breakdown by sector (2016) Global copper consumption breakdown by usage (2016)

Source: IWCC, ICA, DBS Bank

Building Construction

29%

Home appliance &

PC21%Infrastructure

16%

Transport13%

Industrial 11%

Ammunition, coins10%

Electrical products

37%

Power Utilities35%

Plumbing &

11%

Ammunition, coins10%

Others7%


Global demand growth rate by century

Global demand forecast by region

Source: Bloomberg Finance L.P., WBMS, DBS Bank


2.5% 2.6%1.4%

-3.3%

2.5% 2.8% 2.8% 3.1%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

1970-2017 1970's 1980's 1990's 2000's 2010's 2010-2017 2017-2022F


25

on average. The worst period for copper demand was in the 1990s, which was driven by negative CAGR of 12.5% and 3.2% in demand from China and US, respectively.

We believe copper consumption is entering a new growth phase driven by an “electrifying society”. Electrification of transportation should be a mega-trend and the strong government push for electric vehicles will keep copper demand strong in China. The growing need for renewable energy is another critical factor. We forecast that global copper demand will register its highest growth of an annual 3.1% for the next five years. This will also be bolstered by emerging economies, including India and ASEAN, entering the high copper-consuming phase.

0

5,000

10,000

15,000

20,000

25,000

30,000

00 02 04 06 08 10 12 14 16 18F 20F 22F

(k tonnes) Oceania AfricaSouth & Central America North AmericaEurope Asia

Global copper demand forecasts

Source: WBMS; ICSG, DBS Bank


y-o-y (%) CAGR

(k tons) 2016 2017 2018F 2019F 2020F 2021F 2022F 2017 2018F 2019F 17-22F

Asia 16,398 16,564 17,135 17,748 18,314 18,900 19,495 1.0 3.4 3.6 3.3

China 11,642 11,790 12,144 12,545 12,921 13,309 13,708 1.3 3.0 3.3 3.1

Japan 973 998 1,003 1,018 1,039 1,059 1,070 2.6 0.5 1.5 1.4

South Korea 759 656 669 682 692 699 706 (13.6) 2.0 2.0 1.5

Taiwan 507 498 508 523 534 542 550 (1.8) 2.0 3.0 2.0

India 499 486 524 556 584 619 656 (2.7) 8.0 6.0 6.2

Other 2,018 2,137 2,286 2,423 2,544 2,672 2,805 5.9 7.0 6.0 5.6

Europe 3,781 3,712 3,786 3,881 3,960 4,020 4,081 (1.8) 2.0 2.5 1.9

Germany 1,243 1,176 1,200 1,224 1,236 1,248 1,261 (5.4) 2.0 2.0 1.4

Italy 596 633 646 659 665 672 679 6.2 2.0 2.0 1.4

Other 1,942 1,903 1,941 1,999 2,059 2,100 2,142 (2.0) 2.0 3.0 2.4

North America 2,405 2,324 2,404 2,479 2,553 2,627 2,707 (3.3) 3.4 3.1 3.1

US 1,811 1,775 1,811 1,838 1,867 1,893 1,922 (2.0) 2.0 1.5 1.6

Other 594 549 593 641 686 734 785 (7.4) 8.0 8.0 7.4

South & Central America

672 718 751 772 796 826 856 6.9 4.6 2.8 3.6

Brazil 511 583 612 630 649 675 702 14.0 5.0 3.0 3.8

Other 161 135 139 142 147 151 154 (15.8) 3.0 2.0 2.6

Africa 140 119 122 126 134 141 145 (14.6) 2.0 4.0 4.0

Oceania 23 49 51 54 57 58 60 113.0 5.0 5.0 4.2

Total 23,418 23,487 24,249 25,060 25,813 26,572 27,345 0.3 3.2 3.3 3.1


27

e believe copper consumption is entering a new growth phase driven by an “electrifying society”.

With the electrification of energy demand, we expect demand for electricity to outstrip the growth in total primary energy demand going forward. The production, distribution and transmission of all that power will require a great deal of copper. A mega trend will be the transition to electric vehicles from internal combustion engine vehicles. Also driving demand is renewable energy, which has higher intensity of copper consumption – copper usage per megawatt hour of offshore wind and solar power generation is significantly higher than that for conventional power generation.

EV market to see strongest growth in next decade

The electric vehicle, or EV, market will register strong growth to 2030. This is attributed to 1.) purchasing incentives as part of national policy, 2.) high consumer acceptance of electric vehicles, 3.) cheaper batteries due to substantial capacity expansion, and 4.) fast-expanding charging infrastructure in cities. As of 2017, there are 1.02mn EVs* produced, up from 48,000 in 2011, a CAGR of 87%, according to our auto analyst, Rachel Miu. This is set to achieve an CAGR of 28% over the next decade to 12.3mn units in 2030, according to Miu.

Sales of EVs and HEVs** are rising. In 2017, sales of these vehicles reached 3.2mn units, up 65.7% annually, from 254k units in 2012. We expect sales to increase to 28.7mn units in 2030 from 3.2mn in 2017, up 18% annually. Hybrid electric vehicles, or HEVs, are expected to make a key contribution to the overall electric vehicle market with a 16% CAGR in light of less cost competitiveness of batteries in EVs and low oil prices bolstered by US shale oil’s output.

*EV: BEV (Battery Electric Vehicle) and PHEV (Plug Hybrid Electric Vehicle)

** EV & HEV: EV and HEV (Hybrid Electric Vehicle), Hybrid Bus and E-bus.

W

Electrifying Society: A Key Driver of Copper Demand

China has been actively promoting the adoption of electric vehicles in the country.

In September 2014, it introduced an exemption for EVs and HEVs from the 10% purchase tax. The tax exemption was set to expire in 2017, but has been extended to 2020 China’s policies are also increasingly selecting for better quality, higher performing EVs. This year, it lifted the subsidy requirement on a single-charge range from 100km to 150km. Also, the subsidies given to the higher-range models have been raised. By 2020 however, China plans to phase out the subsidies. Meanwhile, it is introducing a new energy vehicle (NEV) credit scheme for automotive makers and importers, making it mandatory for these companies to obtain a minimum level of NEV credits: 10% in 2019, and 12% in 2020. The credit value per electric car will vary depending on specifics such as charging range, with preference given to more advanced technology. Originally set to start in 2018, the scheme has been deferred to 2019 to allow for a smoother transition.

We expect Asia’s EV market, led by China, to grow at a CAGR of 24% till 2030, higher than the expected 21% growth globally. As the result, Asia is likely to increase its share of the global EV market to 69% in 2030 from 51% in 2017. North America, led by the US should remain the second largest EV market for the next decade, growing 16% annually. In particular, we expect the EV market to enjoy its strongest growth over the next three years in Asia, expanding 35% annually to reach 8.8mn units in 2020.

EV & HEV forecasts

Source: International copper alliance; IDTechEX; BYD, DBS Bank


China opting for high-performance EVs

EV & HEV forecasts EV forecast for China

EV forecast Source: DBS Bank

Source: IEA; IDTechEX; BYD, DBS Bank

EV forecast breakdown by region


0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16 17 18F 19F 20F 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F

(k units) Others EuropeNorth AmericaAsia Growth rate


29

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

16 17 18F 19F 20F 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F

(k units)

China EV sales

Asia51%

North America

21%

Europe23%

Others4%

2017

Asia69%

North America

11%

Europe18%

Others2%

2030

Source: IEA, DBS Bank


We believe that at this stage of the electric-car market development, policy support is indispensable to lower barriers to adoption. A supportive policy environment enables market growth by making vehicles more appealing for consumers, reducing risks for investors and encouraging large-scale electric-vehicle business streams.

We believe that the most important policies should be support the research and development of innovative technologies, and financial incentives to lower the total cost of ownership. Recent advancements in battery cost and performance show that research and development, and mass production both lead to rapid cost declines and performance improvements.

However, despite rapidly decreasing battery costs since 2009, electric-car battery packs are still a major cost component and drive up retail prices. Financial incentives remain important in reducing the gap between electric and conventional cars in terms of purchase cost and total cost of ownership.

EV support policies

China In 2016, implementation of the fourth stage of the fuel consumption standard framework

Acquisition tax and excise tax exemption (depending on engine displacement and price, in the range of RMB35,000-60,000 or US$5,100-8,700)

Circulation and ownership tax exemption

Possibility of local subsidies within the limit of 50% of the amount granted via central subsidies

From 2017, 20% reduction from 2016 subsidies, with the plan to adjust policies according to market response until 2020

In seven major urban cities, exemptions from licence plate access restrictions

Locally, access to bus lanes, exemption from access restrictions at peak times, free charging, free parkingGermany EU tailpipe emission standard (Euro 6 in 2016), EU fuel economy regulation

Purchase rebates of EUR4,000 (US$4,400) for BEVs and EUR3,000 (US$3,300) for PHEVs, at the limit of 400,000 cars until 2020 or EUR600m (US$674m)

Automakers should provide half of the incentive amount, the government covering the other half

Ten-year circulation on tax exemption, reduced to five years from 2021

Tax deduction for company cars

Differentiated plates for EVs, allowing for differentiated measures

Locally, free parking, dedicated parking and access to bus lanesIndia Tailpipe emission standard (Bharat 3, equivalent Euro 6)

FAME Scheme (includes several components, such as demand incentives and pilot projects)

In some states, registration tax and VAT rebates or exemptionsJapan Tailpipe emissions standard (PNLT 2009, equivalent Euro 6)

Battery capacity and electric range-based purchase subsidy of JPY850,000 (US$7,700) maximum, e.g. 30kWh-battery Nissan Leaf: JPY330,000 (US$3,000)

Locally, waivers on fees, access to restricted trafficUS Corporate Average Fuel Economy (CAFE) standard with multipliers for EVs and alternative powertrains

Tax credit of US$2,500-7,500 to be phased out after 200,000 units per manufacturer are sold for use within the country

ZEV product mandates in place in nine states

In some states, purchase rebates and registration tax exemptions

Source: Copper Alliance, IDTechEX; BYD, DBS Bank


31

Copper usage per unit of car

Copper to benefit from EV market growthCopper, the irreplaceable metal for electric conductivity, will be in greater demand than ever in the production of EVs.

This is because the EV, which uses an electric motor powered by batteries or fuel cells, requires more copper to manufacture than the conventional internal combustion engine vehicle (ICEV), which is powered by gasoline or diesel. The greater the reliance in electricity, the more copper is needed to make the vehicle. So, a battery-operated vehicle (BEV), which operates exclusively on battery power, requires more copper than a plugged-in hybrid electric vehicle (PHEV), which has a battery that can be recharged from plugging into an external electric power source and also operates on gasoline or diesel. Among BEVs, buses would use up more copper than cars because they need bigger batteries to run. Hybrid electric vehicles (HEVs), which can’t be plugged in, we do not include in our definition of “EVs”.

According to research commissioned by the International Copper Association (ICA), EVs require a substantial amount of copper in the batteries, windings and copper rotors used in their electric motors, and in wiring, busbars and the charging infrastructure. It takes 83kg of copper to make one BEV, and 40kg to make one HEV, which is four and two times respectively what is required for an ICEV. The BEV battery pack alone contains 40kg of copper (half of its total copper content) and is the single biggest area of copper consumption.

BEVs consume four times more copper


Based on our EV forecasts, we project that copper demand from EVs will rise from 208k tonnes in 2017 to 1.91mn tonnes in 2030, up 19% annually. Copper demand from EVs is estimated to equate 8.2% of total copper consumed in 2017 by 2030, up from an estimated 0.9% in 2017. For next five years, copper demand from EVs will register the strongest growth of 29% in CAGR, in line with our EV forecasts. In 2022, copper usage in EVs should contribute to 2.3% of total copper demand.

In our pessimistic case scenario, we have factored in the possibility of oil prices staying low and leading to slower adoption of EVs globally. We assume that HEVs’ contribution in terms of unit sales to the total HEV and EV market will gradually lower to 49% in 2030 from 64% in 2017. Where EVs’ contribution exceeds the premise, we expect a positive impact on copper demand.

Copper usage per unit of car by component

Forecast of copper demand in EV



(kg) ICEV HEV PHEV BEV Ebus Hybrid

Ebus BEV

Battery 1.0 22.0 40.0 12.0 292.0

Inverter 0.3 0.3 0.3 1.0 1.0

Electric Motor 5.0 5.0 9.9 20.0 20.0

HV Wire 5.0 5.0 5.0 11.0 11.0

Other 5.0 5.0 5.0 5.0 5.0 5.0

LV Wire 18.0 23.0 23.0 23.0 40.0 40.0

Total 23.0 39.3 60.3 83.2 89.0 369.0

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0

500

1,000

1,500

2,000

2,500

15 16 17 18F 19F 20F 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F

(k tons) Ebus hybrid

Ebus BEV

Car HEV

Car BEV

Car PHEV

Contribution to total copper demand


33

Outside of the copper demand projections based on usage in electric vehicles, we also expect copper uses associated with infrastructure. First, each 3.3kW charger will add 0.7kg of copper demand with fast chargers, say a 200kW one, adding up to 8kg of copper each. On top of that, copper will be needed in power generation and grid infrastructure, and grid storage and charging infrastructure. Copper consumption in these areas, negligible in the early stages, is set to grow strongly as electric vehicles become more popular. According to industry experts, copper demand from electric-vehicle infrastructure is likely to register 29% growth during 2020-2030, with share of consumption expanding to 37% in 2030 from 29% in 2020.

Forecast of copper demand in EV by scenario

Forecast of copper demand in EV & EV infrastructure



0

500

1,000

1,500

2,000

2,500

(k tons) Base case

Pessimistic

Optimistic

12 13 14 15 16 17 18F 19F 20F 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2020F 2025F 2030F

(k tonnes) Hybrid/Electric vehicleCharging infrastructureGrid storageGeneration and grid infrastructure


Renewable energy a copper guzzler

Copper is also the key metal in the renewable energy theme. Renewable energy consumes copper more intensely than conventional power generation – copper usage per megawatt hour of offshore wind and solar power generation is significantly higher than that for coal or nuclear power generation. As such, the expansion of renewable energy globally should be another driver of copper demand going forward.

Based on International Energy Agency’s (IEA) forecasts on global average annual net capacity addition between 2017-2040 (74GW for solar photovoltaic systems, 50GW for wind and 36GW of all other renewables), 635k tonnes of copper demand (3% of global copper consumption in 2017) would be generated every year on average until 2040. This is up 37% from copper consumption between 2010-2016. The IEA also expects renewables to contribute 40% of total power generation by 2040, led by the strong adoption of solar photovoltaics in China and India.

0

2

4

6

8

10

12

Wind

Solar

Wind

Natura

l Gas

Nuclear

Hydro

Coal

(kg/KW)

Offshore

Onshore

3974

45

5044

36

020406080

100120140160180

2010-2016 2017F-2040F

(GW) Other renewables Wind Solar

195370

158

175110

90

0

100

200

300

400

500

600

700

2010-2016 2017F-2040F

(k tonnes)Other renewables Wind Solar

Copper intensity by power generation type (renewable energy)

Global electricity generation mix forecast by IEA

Global average annual renewable energy capacity additions & forecast

Copper demand from renewable energy capacity additions

Source: BHP Billiton, DBS BankSource: IEA, DBS Bank

Source: IEA, DBS Bank Source: IEA, DBS Bank


35

Copper Mine Supply Staying Tight

We expect real ore availability to be limited despite capacity growth over the decade. Mine capacity has grown, but utilisation has declined over the same period. Global copper production increased at a CAGR of 2.5% from 2000 to 2017, lower than the global mine capacity growth of 3.1%. This is because of the drop in the utilisation ratio over the same time period – declining from over 90% to mid- to low-80%. We believe the major reasons behind the lower utilisation ratio are declining ore grades and rising cash costs as mines age; the lack of new major mine discoveries; as well as growing social instability, including labour strikes at major mines.

There will continue to be obstacles in the ramp-up of ore production going forward. In 2017, the net cash cost of a mine was triple that in 2000, with surging labour costs as the biggest contributor to the cost increase. In addition, capex intensity for mines is another concern for mining costs going forward, having doubled over the last 10 years. In light of currently developing mine projects and mine shutdowns, we expect global mine capacity to increase at around a 2% CAGR over a five-year period (2017-2022). Global copper ore production is expected to grow at a CAGR of 2.9% over the same period, a slowdown from the 4% CAGR from 2010 to 2016.

We expect copper mine output to recover this year, after posting negative growth in 2017. We forecast that global copper ore production will return to growth this year, rising 3.2% in 2018 and 2.9% in 2019. Despite the lack of new large-scale projects in the pipeline, there will still be some additional supply coming through from restarts, expansion at existing mines and commencement of smaller size projects. Also, we are assuming fewer mine disruptions arising from weather and labour issues this year, as compared to 2017.

Copper intensity by power generation type (renewable energy)

World copper mine capacity & utilisation rate

Copper demand from renewable energy capacity additions

Source: ICSG, DBS Bank

Ore supply growth to slow to 2022

80

82

84

86

88

90

92

94

96

0

5

10

15

20

25

30

2000 2003 2006 2009 2012 2015 2018F 2021F

(%)(m tonnes)

World Mine Capacity Mine Capacity Utilisation


In 2017, copper ore production was down 0.7% YoY to 20.3mn tonnes. This can be attributed to 1.) a lack of new supply additions, 2.) falling ore grades, 3.) unfavourable weather conditions at the beginning of the year, and 4.) labour disputes leading to production halts at major mines. By region, North America saw the biggest fall due to the substantial drop in production from both the US and Canada. Major copper ore producing countries, including Chile and Indonesia, also recorded negative growth in their mine output.

In 2018, one-fifth of global production volume remains subject to potential disruption from labour negotiations. The 44-day strike at the world’s largest copper mine, Escondida in Chile, contributed to the mine output decline last year; and concerns over potential mine supply disruptions continue to linger this year. Around 32 labour contracts at copper mines are due for negotiation in 2018 – the highest number since 2010. To date, about half of these negotiations have been completed, with some even reaching early agreement. However, the pending agreements remain a risk to mine output this year, as these mines together account for 21% of global output (based on 2016 production figures); and early talks at Chile’s Escondida mine have ended with no conclusion.

We expect South America to remain a key supplier with strong growth expected in Democratic Republic of the Congo (DRC).

South and Central American countries accounted for 41% of global copper ore production in 2017. We forecast the region to post 1.8% and 5.1% growth in mine output in 2018 and 2019, respectively. Chile is the largest copper ore producer in the world, contributing 27% to the global output in 2017. However, this was a substantial decline from its 35% contribution in 2000, and the proportion is set to decline further to 26% by the end of our forecast period in 2022, as Chile faces the rising threat of falling ore grades with no significant new supply coming up.

Meanwhile, we expect Peru to gain increasing presence as a key copper ore producer. Since the opening of the Las Bambas mine in 2016 – which is the eighth largest copper mine globally, with a production capacity of 450k tonnes – Peru’s copper mine output surged steeply (up 653k tonnes or 38.4% YoY in 2016). As of 2017, Peru was the world’s second biggest copper ore producing country, accounting for 12% of the world’s output.

Copper mine output from Asia fell 3.1% YoY in 2017, as production declined in two key countries – China and Indonesia. We attribute the sluggish output from China to declining ore grades as well as the country’s tightening environmental protection restrictions on pollution-causing mining activities. In Indonesia, there was a temporary ban imposed on concentrate exports from January to April 2017, leading to slower production. We expect continued volatility in the output of these countries in the coming years, on the back of unexpected regulatory changes that may affect mining activities. We forecast 5.6% growth in copper mine output from Asia in 2018, and a 3.4% decline in 2019. The decline in 2019 will largely be due to the production volumes affected by the transformation of Indonesia’s Grasberg mine into underground operations.

South America

Asia


37

y-o-y (%) CAGR

(k tons) 2016 2017 2018F 2019F 2020F 2021F 2022F 2017 2018F 2019F 17-22F

Asia 4,509 4,370 4,616 4,460 4,783 4,754 4,839 (3.1) 5.6 (3.4) 2.1

China 1,851 1,656 1,803 1,868 1,904 1,913 1,919 (10.5) 8.9 3.6 3.0

Indonesia 696 666 721 494 759 696 711 (4.2) 8.3 (31.5) 1.3

Kazakhstan 596 745 754 754 774 774 774 25.1 1.1 0.0 0.8

Others 1,367 1,302 1,337 1,343 1,345 1,370 1,434 (4.8) 2.7 0.4 2.0

Europe 1,677 1,711 1,745 1,831 1,808 1,828 1,828 2.1 2.0 4.9 1.3

Russia 740 740 770 880 951 1,022 1,093 0.0 4.1 14.3 8.1

Others 937 971 975 951 857 806 735 3.7 0.4 (2.5) (5.4)

North America 2,914 2,623 2,594 2,591 2,589 2,685 2,774 (10.0) (1.1) (0.1) 1.1

US 1,431 1,256 1,221 1,211 1,221 1,250 1,319 (12.2) (2.8) (0.8) 1.0

Mexico 766 756 756 763 776 788 788 (1.3) 0.0 0.9 0.8

Others 717 611 618 618 593 648 668 (14.7) 1.1 0.0 1.8


8,337 8,376 8,531 8,965 9,242 9,711 10,113 0.5 1.8 5.1 3.8

Chile 5,553 5,504 5,578 5,588 5,658 5,876 6,024 (0.9) 1.4 0.2 1.8

Peru 2,354 2,445 2,521 2,691 2,783 3,008 3,246 3.9 3.1 6.7 5.8

Others 431 428 431 686 801 826 843 (0.5) 0.7 59.1 14.5

Africa 1,964 2,214 2,426 2,643 2,663 2,671 2,678 12.7 9.6 8.9 3.9

DRC 1,024 1,095 1,267 1,434 1,434 1,441 1,446 6.9 15.7 13.2 5.7

Zambia 738 942 982 1,032 1,052 1,052 1,052 27.6 4.2 5.1 2.2

Others 202 178 178 178 178 178 180 (12.0) 0.0 0.0 0.2

Oceania 1,028 983 1,014 1,043 1,063 1,079 1,176 (4.4) 3.2 2.8 3.6

Australia 948 879 910 939 959 974 1,009 (7.3) 3.6 3.2 2.8

Others 80 105 105 105 105 105 167 30.6 0.0 0.0 9.8

Total 20,429 20,278 20,927 21,534 22,150 22,728 23,408 (0.7) 3.2 2.9 2.9

Global copper mine production forecast

Source: WBMS, Bloomberg Finance L.P., DBS Bank

One-fifth of the global production volume remains subject to potential disruption from labour negotiations

Copper ore production breakdown by country (2000)




Chile 35%

US 11%

Indonesia 8%

Australia 6%

Canada 5%

Russia 4%

Peru 4%

China 4%

Kazakhstan 3%

Others16%

Poland 4%

Chile 27%

Peru 12%

China 8%US

6%DRC

5%

Zambia 5%

Australia 4%

Mexico 4%

Kazakhstan 4%

Russia 4%

Indonesia 3%

Others18%

Chile 26%

Peru 14%

China 8%DRC

6%

US 6%

Zambia 4%

Russia 5%

Australia 4%

Mexico 3%

Kazakhstan 3%

Indonesia 3%

Others17%


DRC experienced a fall in output in 2016 as Glencore suspended production at the Katanga mine. Backed by the resumption of operations at Katanga mine, we expect the mine output from DRC to grow strongly, with double-digit growth rates in 2018 and 2019. After 2019, the growth could come from the new major mines – Kamoa and Kipushi, which are currently undergoing feasibility studies. While the Kamoa-Kakula project would be a significant mine for future supply, and would rank within the top three biggest copper mines globally with projected annual production of over 500k tonnes of copper, we have not factored this potential production volume into our forecast due to the uncertainties over when production will begin. As such, DRC’s production volume is subject to a large upside adjustment.

Mine restarts and new openings are scheduled in Africa and Oceania. Zambia’s production will grow on a ramp-up and new projects. Some projects are in the pipeline for Papua New Guinea, but production will likely start in 2019 and beyond. Until 2019, Australia will be the sole driver of output growth in Oceania, where we expect 2.6% and 2.2% growth in 2018 and 2019, respectively.

Africa & Oceania

Average copper ore grades at Chilean mines

Net cash cost vs. LME copper price



0.50.60.70.80.91.01.11.21.31.41.5

(%)Grades average (%)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

01,0002,0003,0004,0005,0006,0007,0008,0009,000

(US$/tonne) Chile cash costRest of the worldLME Copper price

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

F


39

Challenges in mines beyond 2018Falling ore grades and rising mining costs are limiting factors to mine output. As many of the world’s larger copper mines age amid the lack of new discoveries, a major issue the copper industry faces is decreasing copper content in the ores. We note that the copper ore grade at mines in Chile has been trending down consistently over the years, and the average ore grade has fallen 0.76ppt – from 1.41% in 1999 to 0.65% in 2016. Without discoveries of better quality resources, existing mines will face an increasing cost burden.

The declining grade of mines implies the cost of mining is rising. In fact, the net cash cost of mines globally in 2017 was about three times the levels seen in 2000. Meanwhile, the slight reduction in cash cost from 2014 is thanks to management efforts and other market factors (such as exchange rates and prices of by-products). The world copper cost curve also suggests that the mining cost has increased substantially – especially the cash mining cost in Chile, which grew to US$212/lb in 2017 from US$68.4/lb in 2000, according to Cochilco. The major reasons for this rising cost were the surging costs of labour, other consumable goods and depreciation.


New discoveries of mineral deposits have peaked across all regions, albeit at different times. The same case applies to copper, as 16 out of world’s 20 biggest copper mines were discovered and began production before the 21st century. The four relatively new mines only account for 14% of the combined capacity of the top 20 mines. With ore grades falling at the existing mines, the lack of new projects hints at a steeper cost curve going forward and poses risks to the future growth of production. In addition, the mines discovered in recent periods are located in Latin America and sub-Saharan Africa, where political and social stability is weaker than in other regions. Also, the lack of social infrastructure in those areas would raise the production costs higher and lower supply consistency and visibility.



World copper net cash cost C3 curve (2000 vs 2017F)

Change in C3 cash cost from 2000 to 2016, by element (US$/tonne)

C1 Cash Cost 2000

981

Labour774

Other Consumables536

Services & Contractors

445

TC/RC & Marketing

238

Power 218

Acid 110

Diesel 88

Conc Freight60

Deferred costs 154 BP Credit

335

C3 Net Cash Cost 2000

1,508

C1 Cash Cost1,982

Depreciation814

Other117

Corporate Overheads

117

Interest 73

C3 Cash Cost 2016 = 2,961

(US$/ton)


41

The higher depreciation cost stems from the increase of the capex intensity of mines. Over the last 10 years, capex intensity has almost doubled from US$8,116 per tonne in 2006 to US$16,400 per tonne in 2017. Las Bambas in Peru, which started production in 2016 with a capacity of 460k tonnes per annum and is the biggest recent mine project, is estimated to register a capex intensity of US$18,043 per tonne. The growth of capital intensity should be a key reason to push up copper prices over the long-term.

Source: BHP Billiton, DBS Bank


Mine discovery by century

Capex Intensity trend

Regions Highest metal deposit discoveries made in:

Europe and central Asia 1960s

High income OECD 1980s

East Asia and Pacific 1980s

Latin America 1990s

Sub-Saharan Africa 2000s


here are three broad methods to produce refined copper – i) primary production from copper concentrates, ii) primary production through SX-EW, and iii) secondary production from copper scrap. Most commonly, copper ore is mined, processed into concentrate (which would contain around 30% of copper), and then refined

to form copper cathode. Intermediate steps post-concentrating constitute of smelting to form matte with around 50-70% copper content, converting to blister with 98.5-99.5% copper content and, finally, electrolytic refining into cathode with 99.99% copper content. Increasingly, the hydrometallurgy method is being adopted, where the copper oxide ore goes through electrowinning (SX-EW process) to form cathode.

In 2017, refined copper production through the SX-EW method accounted for around 15% of the total supply of refined copper, while the electrolytic method (from copper concentrates) accounted for 67%. Thanks to copper’s ability to be recycled without any loss of properties, refined copper of the same quality can also be produced from copper scrap. In 2017, secondary refined production amounted to the remaining 18% of total refined copper production.

TCopper Supply Lagging Demand


Copper production process


43

Refining capacity to expand steadilyTotal global refinery capacity has grown by 60% over the past 17 years, to reach 27.4mn tonnes in 2017 from 17.1mn tonnes in 2000 (CAGR of 2.8%) This was largely driven by the smelting expansion in China, where, by 2016, both smelting and refining capacity had expanded by six times to 6.5mn tonnes (from 1.1m tonnes in 2000) and 10.9mn tonnes (from 1.7m tonnes in 2000), respectively. By 2017, nine out of the world’s 20 largest copper refineries were located in China.

Global refining capacity is expected to grow 14% (annual growth of 2.6%) to 31.1mn tonnes by 2022 with the major contributions of China and India. China is expected to carry on with capacity addition and contribute the most to global refining capacity growth in in the next couple of years, albeit at a decelerated pace. There are at least around 1.7mn tonnes of smelting projects currently in the pipeline for China from 2018 to 2020, which should also lead to a similar increase in its refining capacity by over 20%. In India, one of world’s largest smelters, owned by Vedanta, has plans to double its smelting capacity. There will also be some increases from DRC and Poland, while South America will be the only region experiencing a negative change in refining capacity.


Source: ICSG, DBS BankSource: Bloomberg Finance L.P., DBS Bank

Refined copper breakdown by production method (2017)

Global refining capacity & utilisation rate Annual change in refining capacity by region (2018F-2021F)

Primaryelectrolytic

67%

Secondary18%

PrimarySX-EW15%

76

78

80

82

84

86

88

90

0

5

10

15

20

25

30

35

2000 2003 2006 2009 2012 2015 2018F 2021F

(%)(m tonnes)

-5%

0%

5%

10%

15%

20%

25%

Asia Africa Europe NorthAmerica

SouthAmerica

Oceania


In line with the huge growth in refining capacity, China’s refined production has gained substantial presence in the global refined copper market. From a mere 9% in 2000, China’s contribution to global refined production rose to a whopping 38% in 2017, making it the largest copper producer in the world. While we observe declining contribution from developed countries such as the US, whose share dropped form 12% in 2000 to 5% in 2017, we should see more developing countries stepping up. In particular, we expect to see a higher contribution from India going forward; it has become the sixth biggest refined copper producer, with a 4% share in 2017 (from less than 2% in 2000), and has plans for further capacity expansion.


Refined copper production breakdown by country (2000)



Chile18%

US12%

Japan10%

China9%

Russia6%

Germany5%

Canada4%

Poland3%

Australia3 %

South Korea3%

Others27%

China 38%

Chile 10%Japan

6%US 5%

Russia 4%

India 4%

Germany 3%

DRC 3%

South Korea 2%

Poland 2%

Others23%


45

Refined copper supply is heavily dependent on mine supply and copper prices The global copper refinery capacity was 27.4mn tonnes in 2017, with an 85% utilisation ratio. Historically, refinery capacity has been good enough to meet global consumption and, hence, had not been a key determinant for the global supply of refined copper. Refineries’ utilisation has been fluctuating along with copper ore and refined metal prices, posting its lowest at 77.3% in 2009, after the price of copper crashed during the financial crisis. Along with the recovery in copper prices, the utilisation ratio has recovered and we expect it will be sustained at around 85% going forward.

Smelters and refineries purchase ores from mines according to the pricing mechanisms known as treatment charges (TC) and refining charges (RC). TC and RC conceptually imply miners are paying smelters/refiners to process the ores. It could also be understood as the processing companies paying for the ores at the price equivalent to the difference between the LME copper price and TC/RC. Because of the tightness in copper ore supply, TC/RCs for copper have been far below the levels for other metals. In other words, copper smelters and refineries have not been profiting from processing copper ores to produce refined metal. Instead, smelters and refineries earn from by-products (gold, silver and sulphuric acid), free metal and premium. Free metal refers to the metal content in excess of the payable limit (approximately 95.6% for copper), which allows smelters to benefit if they achieve a higher recovery ratio. Although TC/RCs do not contribute to the profits of smelters and refineries, it is still a critical factor for their businesses as it covers marginal operating costs.

Benchmark TC/RCs are negotiated periodically between major miners and smelters and fixed, while TCs in the spot market fluctuate. Spot TCs are a barometer for the condition of the copper metal and concentrates market. In the big picture, TC moves in line with copper prices. However, it is determined more by the condition of the concentrates market. We reckon that the utilisation ratio in refineries used to increase along with benchmark TC/RC.

Source: Teck Resources, DBS BankSource: ICSG, Bloomberg Finance L.P., DBS Bank

Copper refinery utilisation copper prices Refinery utilisation vs. benchmark treatment charges (TC)

76

78

80

82

84

86

88

90

01,0002,0003,0004,0005,0006,0007,0008,0009,000

2000 2002 2004 2006 2008 2010 2012 2014 2016

(%)(US$/tonne)LME copper price (average)

76

78

80

82

84

86

88

0

20

40

60

80

100

120

2006 2008 2010 2012 2014 2016 2018F

(%)(US$/tonne)Benchmark TC


Since 2015, TCs have been trending down, reflecting the tight ore market. The tightness is expected to aggravate as there are no significant mine projects until 2024, while smelting capacity additions continue in China. Also, the restriction on secondary copper production driven by the Chinese import ban on low-grade scrap will bring about higher primary production growth, implying higher demand for copper ore.

Copper supply growth to lag demand Refined copper output is forecast to grow at a five-year CAGR of 3% between 2017 and 2022, lower than the 3.7% CAGR during 2010 to 2015, but improving from the tepid growth in 2016 to 2017 (0.3% y-o-y in 2016; 0.6% y-o-y in 2017). This is lower than expected refined copper demand growth of 3.1% over the same period. Despite the capacity expansion of smelting and refinery facilities globally, copper ore availability will be a hindrance to strong supply growth.

Besides copper ores, secondary refined copper – which accounted for approximately 18% of total refined copper supply – is another variable to watch. In 2017, despite the YoY decline in copper mine supply, refined copper output posted positive growth, thanks to the higher contribution from secondary production, which had increased by 30.1% YoY. In the coming years, however, we expect secondary refined copper to decline 7.2% due to China’s restrictions on scrap imports and the plans to completely ban Category 7 scrap by the end of 2018. The scrap ban is estimated to remove round 500k tonnes of copper supply from the global market, which is equivalent to 2.2% of the global production volume in 2017. China’s environmental protection policies, such as upgrading standards for smelting plants, should be a critical factor for the supply of refined copper as China’s accounts for 38% of global copper supply, and is the largest supplier of refined copper.


4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

0

20

40

60

80

100

120

140

160

10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 18.1

(US$/tonne)(US$/tonne) China Copper Concentrate TC 30% CIF LME Copper price

Spot copper TC & LME copper price


47

Source: WBMS, Bloomberg Finance L.P., DBS Bank

y-o-y (%) CAGR

(k tons) 2016 2017 2018F 2019F 2020F 2021F 2022F 2017 2018F 2019F 17-22F

Asia 4,509 4,370 4,616 4,460 4,783 4,754 4,839 (3.1) 5.6 (3.4) 2.1

China 1,851 1,656 1,803 1,868 1,904 1,913 1,919 (10.5) 8.9 3.6 3.0

Indonesia 696 666 721 494 759 696 711 (4.2) 8.3 (31.5) 1.3

Kazakhstan 596 745 754 754 774 774 774 25.1 1.1 0.0 0.8

Others 1,367 1,302 1,337 1,343 1,345 1,370 1,434 (4.8) 2.7 0.4 2.0

Europe 1,677 1,711 1,745 1,831 1,808 1,828 1,828 2.1 2.0 4.9 1.3

Russia 740 740 770 880 951 1,022 1,093 0.0 4.1 14.3 8.1

Others 937 971 975 951 857 806 735 3.7 0.4 (2.5) (5.4)

North America 2,914 2,623 2,594 2,591 2,589 2,685 2,774 (10.0) (1.1) (0.1) 1.1

US 1,431 1,256 1,221 1,211 1,221 1,250 1,319 (12.2) (2.8) (0.8) 1.0

Mexico 766 756 756 763 776 788 788 (1.3) 0.0 0.9 0.8

Others 717 611 618 618 593 648 668 (14.7) 1.1 0.0 1.8


8,337 8,376 8,531 8,965 9,242 9,711 10,113 0.5 1.8 5.1 3.8

Chile 5,553 5,504 5,578 5,588 5,658 5,876 6,024 (0.9) 1.4 0.2 1.8

Peru 2,354 2,445 2,521 2,691 2,783 3,008 3,246 3.9 3.1 6.7 5.8

Others 431 428 431 686 801 826 843 (0.5) 0.7 59.1 14.5

Africa 1,964 2,214 2,426 2,643 2,663 2,671 2,678 12.7 9.6 8.9 3.9

DRC 1,024 1,095 1,267 1,434 1,434 1,441 1,446 6.9 15.7 13.2 5.7

Zambia 738 942 982 1,032 1,052 1,052 1,052 27.6 4.2 5.1 2.2

Others 202 178 178 178 178 178 180 (12.0) 0.0 0.0 0.2

Oceania 1,028 983 1,014 1,043 1,063 1,079 1,176 (4.4) 3.2 2.8 3.6

Australia 948 879 910 939 959 974 1,009 (7.3) 3.6 3.2 2.8

Others 80 105 105 105 105 105 167 30.6 0.0 0.0 9.8

Total 20,429 20,278 20,927 21,534 22,150 22,728 23,408 (0.7) 3.2 2.9 2.9

Global refined copper production forecast


After the tepid growth observed in 2017, we forecast that global refined copper output will grow by 3.4% in 2018, and 3.2% in 2019. This growth would be supported by the rise in ore availability YoY, and less so by secondary production. This trend would imply strong production growth in South and Central America, where the refined copper output depends on primary production. Production from South and Central America is forecast to grow by a huge 28.9% YoY in 2018, after falling 23.7% YoY in 2017.

The global output of refined copper registered a slight growth of 0.6% YoY to 23.2mn tonnes in 2017. Amid the contraction in mine output during the same period, higher copper scrap availability supported the output of refined copper. Notably, secondary refined copper production grew by a whopping 30% YoY to 4.2mn tonnes in 2017, from 3.2mn tonnes in 2016. This was made possible thanks to the release of copper scrap that was hoarded during the period of sluggish prices. The copper price bottomed out in 2016, and maintained a strong uptrend throughout 2017.

Reflecting the impact of strict regulations on scrap imports, we forecast that China’s refined copper output will decline by 2% YoY in 2018. However, we expect the lower secondary production to be increasingly offset by rising primary production in China on the back of continued smelting capacity additions and higher copper ore availability. As such, China’s refined output could start inching up again YoY from 2019.

We forecast increases in refined output from Europe, growing by 11.7% YoY in 2018 and 2.2% in 2019. This will be supported by the planned smelter expansion in Poland. Meanwhile, the US saw a significant decline in its refined output in 2017, along with a contraction in its ore output. We expect the ore output decline to moderate this year, and the impact on refined output should be muted, accordingly. Refined output from North America is forecast to increase slightly by 1.3% YoY in 2018, before slowing to 0.8% YoY in 2019.

Global refined copper production: Primary vs secondary Global secondary production growth

12%13%14%15%16%17%18%19%20%

0

5,000

10,000

15,000

20,000

25,000

2008 2010 2012 2014 2016

(k tonnes)Secondary productionPrimary production

Secondary productionas % of total

-20%

-10%

0%

10%

20%

30%

40%

0500

1,0001,5002,0002,5003,0003,5004,0004,500

2008 2010 2012 2014 2016

(k tonnes)Secondary production Y-o-y %



49

Impact China’s scrap import ban China has imposed a series of regulations on copper scrap imports since last year. It has tightened the import licence issuance, especially on lower-grade scrap under Category 7. Due to the large amounts of impurities contained in low-grade scrap, the processing activities are harmful to the environment. It was recently announced that the import of Category 7 copper scrap would be completely banned from the end of 2018.

We expect a significant impact on the refined production of not only China, but also globally. In 2017, China produced 2.3mn tonnes of secondary copper, which accounted for 56% of the world’s total secondary copper production and a quarter of China’s total refined copper production. China’s scrap import restrictions are estimated to affect 500k tonnes of copper output, according to Jiangxi Copper, China’s biggest copper producer. It has also estimated that China’s scrap imports would decline by 45% YoY. Indeed, China’s copper scrap import volume plunged 37% YoY in January to July 2018.

The copper scrap rejected by China due to the new regulations is reportedly being flown into Southeast Asian countries. This implies higher secondary copper production from Asia ex-China for as long as China continues to restrict scrap imports.

However, the growth in refined output from the Southeast Asian countries would not be sufficient to make up for the lost output from China, due to the lack of facilities. While some Chinese copper refiners are considering setting up processing plants in these countries, speculation over the possible removal of the regulation by China in the next couple of years is acting as a hindrance. There is also the possibility of these countries imposing similar restrictions on scrap imports, in consideration of the negative effects on the environment.

China refined copper production: Primary vs. secondary

Global secondary production growth

China copper scrap imports


15%

20%

25%

30%

35%

40%

0

2,000

4,000

6,000

8,000

10,000

2008 2010 2012 2014 2016

(k tonnes)China's secondary productionChina's primary production

Secondary productionas % of total (R)

-80%-60%-40%-20%0%20%40%60%80%100%

050

100150200250300350400450500

10.2 11.2 12.2 13.2 14.2 15.2 16.2 17.2 18.2

(k tonnes)China's copper scrap imports y-o-y


Appendix I: Global Copper Sector Value Chain

2017 (k tonnes) % of global output

Chile 5,504 27.1%

Peru 2,445 12.1%

China 1,656 8.2%

US 1,256 6.2%

DRC 1,091 5.4%

2016 (k tonnes) % of global production

FREEPORT-MCMORAN INC 2,108 10.3%

CODELCO 1,657 8.1%

GLENCORE PLC 1,425 7.0%

BHP BILLITON LIMITED 1,326 6.5%

GRUPO MEXICO SAB DE CV-SER B 957 4.7%

VEDANTA RESOURCES PLC 676 3.3%

ANGLO AMERICAN PLC 577 2.8%

FIRST QUANTUM MINERALS LTD 539 2.6%

RIO TINTO PLC 523 2.6%

MMG LTD 503 2.5%

(k tonnes)

Mine capacity* 23,906

Mine production 20,278

Reserves 790,000

Total resources 5,600,000

Copper ores

Top 5 mine producing countries:

Top 10 miners

*Capacity, reserves and resources are according to ICSG; production data is based on WBMS


51

2017 (k tonnes) % of global output

China 8,889 37.8%

Chile 2,430 10.3%

Japan 1,488 6.3%

US 1,079 4.6%

Russia 867 3.7%

2017 (k tonnes) % of global consumption

China 11,790 50.1%

US 1,775 7.5%

Germany 1,178 5.0%

Japan 998 4.2%

South Korea 656 2.8%

2016 %

Power Utilities 35%

Electrical products 37%

Plumbing & Valves, fittings 11%

Ammunition, coins 10%

Others 7%

Total 100%

2017 (k tonnes)

Refinery capacity* 27,402

Refined production 23,225

Refined demand 23,487

2017 (k tonnes) (%)

Primary refined production 19,056 82

Secondary refined production 4,168 18

Refined copper

Top 5 refined copper producing countries:

Top 5 refined copper consuming countries:

Consumption breakdown by usage

*Capacity according to ICSG; production and demand data is based on WBMS

Sources of all data: ICSG, WBMS, IWCC, ICA, Bloomberg Finance L.P., DBS Bank


Appendix II: China Copper Sector Value Chain

2017 (k tonnes)

Mine production 1,656

Copper ore imports 4,333

Copper ore exports (tons) 48

2017 (k tonnes)

Refining capacity* 10,870

Refined production 8,889

Refined consumption 11,790

Refined imports 3,243

Refined exports 338

Copper ore/scrap

China demand breakdown

*Capacity according to ICSG; production and demand data is based on WBMS

Sources of all data: ICSG, WBMS, Antaike, Bloomberg Finance L.P., DBS Bank

2017 (k tonnes) (%)

Primary refined production 6,568 74

Secondary refined production 2,321 26

2016 % of total

Power 50%

Air conditioning refrigeration 15%

Transportation 10%

Construction 9%

Electronic 7%

Others 9%

Total 100%


53

Appendix III: Top copper mines and refiners

Mine Company Country Capacity (k tonnes)

1 Escondida BHP Billiton (57.5%), Rio Tinto Corp. (30%), Japan Escondida (12.5%)

Chile 1,270

2 Grasberg P.T. Freeport Indonesia Co. (PT-FI), Rio Tinto Indonesia 750

3 Morenci Freeport-McMoRan Inc (72%), affiliates of Sumitomo Corporation (28%)

US 520

4 Buenavista del Cobre (former Cananea)

Grupo Mexico Mexico 510

5 Cerro Verde II (Sulphide)

Freeport-McMoRan Copper & Gold Inc. (54%), Compañia de Minas Buenaventura (19.6%), Sumitomo (21%)

Peru 500

6 Collahuasi Anglo American (44%), Glencore plc (44%), Mitsui (8.4%), JX Holdings (3.6%)

Chile 454

7 Antamina BHP Billiton (33.75%), Teck (22.5%), Glencore (33.75%), Mitsubishi Corp.(10%)

Peru 450

8 Las Bambas MMG (62.5%), Guoxin International Investment Corporation Limited (22.5%), CITIC Metal Co., Ltd. (15%)

Peru 450

9 Polar Division (Norilsk/ Talnakh Mills)

Norilsk Nickel Russia 450

10 El Teniente Codelco Chile 432

11 Los Bronces Anglo Amercian (50.1%), Mitsubishi Corp. (20.4%), Codelco (20%), Mitsui (9.5%)

Chile 410

12 Los Pelambres Antofagasta Plc (60%), Nippon Mining (25%), Mitsubishi Materials (15%)

Chile 400

13 Chuquicamata Codelco Chile 350

14 Radomiro Tomic Codelco Chile 330

15 Sentinel First Quantum Minerals Ltd Zambia 300

16 Bingham Canyon Kennecott US 280

17 Kansanshi First Quantum Minerals Ltd (80%), ZCCM (20%) Zambia 270

18 Toromocho Chinalco Peru 250

19 Olympic Dam BHP Billiton Australia 225

20 Mutanda Glencore Plc Congo 220

Global top 20 copper mines (Based on Jul 2017)



Refinery Company Country Capacity (k tonnes)

1 Guixi Jiangxi Copper China 900

2 Jinchuan Jinchuan Non Ferrous Co. China 650

3 Daye/ Hubei (refinery)

Daye Non-Ferrous Metals Co. China 600

4 Birla Birla Group (Hidalco) India 500

5 Yunnan Copper Yunnan Copper Industry Group (64.8%) China 500

6 Pyshma Refinery UMMC (Urals Mining & Metallurgical Co.) Russia 460

7 Amarillo Grupo Mexico United States

450

8 Chuquicamata Refinery

Codelco Chile 450

9 Toyo/Niihama (Besshi) Sumitomo Metal Mining Co. Ltd Japan 450

10 Onsan Refinery I LS-Nikko Co. (LS, Nippon Mining) Korea Republic

440

11 Hamburg (refinery) Aurubis Germany 416

12 El Paso (refinery) Freeport-McMoRan Copper & Gold Inc. United States

415

13 Las Ventanas Codelco Chile 410

14 Jinchuan (Fangchenggang)

Jinchuan Non Ferrous Co. China 400

15 Jinguan (refinery) Tongling Non-Ferrous Metals Group China 400

16 Jinlong (Tongdu) (refinery)

Tongling NonFerrous Metal Corp. (52%), Sharpline International (13%), Sumitomo Corp. (7.5%), Itochu Corp. (7.5%)

China 400

17 Shandong Fangyuan Dongying, Shandong China 400

18 Sterlite Refinery Vedanta India 400

19 Xiangguang Copper Yanggu Xiangguang Copper Co China 400

20 CCR Refinery (Montreal)

Glencore plc Canada 370

Global Top 20 copper refineries (Based on Jul 2017)



55

Disclaimers and Important Notices

The information herein is published by DBS Bank Ltd (the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee.

The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof.

The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies.

The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.


55

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