Copper output of major mining companies in the first half of the year was better than expected
Release time:2020-08-14Click:1176
New crown epidemic affects global copper production
In 2020, Xinguan epidemic will have a great impact on copper output, which can be roughly divided into two stages. In the first stage, Xinguan epidemic broke out in the main copper consumption areas from February to April, but Peru and Chile were also affected. The epidemic situation in Peru was more serious, and Chile was relatively good. Between the middle of March and the middle of May, Peru and Chile both introduced more stringent epidemic control measures. From January to June, Peru's copper mine production dropped by about 210000 tons, while Chile's copper production increased by about 80000 tons during the same period; In the second stage, after the lifting of the epidemic control measures in Chile and Peru in the middle and late May, the epidemic situation in Chile accelerated. During this period, the Chilean and Peruvian governments did not introduce strict control measures as in the first stage. However, when the copper workers' contract expired, the labor and capital of zaldivar and centinela copper mines did not negotiate and broke out a strike. Fortunately, the Chilean government intervened in time The two copper mine strikes have subsided with the trade union's acceptance of the new contract. Up to now, there has been no copper mine closed due to the epidemic in Chile.
ICSG predicted that the global copper production would drop by 4% or 810000 tons to 196.65 million tons in 2020; in July, Shanghai Nonferrous Metals network predicted that the global copper production would drop by 450000 tons in 2020.
The main copper producing countries are under great economic pressure
In 2020, the new crown epidemic will have a great impact on the global economy. The main copper producing countries should not only bear the pressure of the increase of public expenditure caused by the epidemic, but also bear the pressure of the production and price of resource goods. The downward pressure on the economy of the main copper producing countries is greater, and at the same time, there is a large debt burden. If there is no more extreme situation, it is unlikely to introduce epidemic control measures like that in March in the second half of the year. We think that the main copper producing countries have the power to intensify production.
According to the forecast of IMF, GDP of Brazil, Chile, Peru, Democratic Republic of Congo and Zambia will be - 5.3%, - 4.5%, - 4.5%, - 2.2% and - 3.5% in 2020, respectively, which will decrease by 6.4%, 5.6%, 6.7%, 6.6% and 5% respectively compared with that in 2019. At the same time, the government's debt pressure is increasing. IMF forecasts that the proportion of general government net borrowing in GDP of Brazil, Chile, Peru, Democratic Republic of the Congo and Zambia will be - 9.3%, - 6.3%, - 7.1%, - 1.2% and - 5.7% in 2020, respectively, which is 3.3%, 3.7%, 5.7%, 0.9% and 1.9% respectively.
Copper output of major mining companies
After the outbreak of the epidemic in March 2020, especially after the outbreak in South America, the market has strong expectations for the reduction of copper production. ICSG expects that the copper output will be reduced by 800000 tons in 2020.
Major mining companies have also updated their production guidelines for 2020. According to the data of the second quarter report, the latest production guidelines of 10 major mining companies such as BHP Billiton, Freeport, Anglo American resources, Rio Tinto, first quantum and Glencore are 7.8228 million tons, which is about 400000 tons lower than the guidelines at the beginning of the year. The output of these 10 major mining companies accounts for about 40% of global copper production in 2019.
In July, major mining companies (including Freeport, Codelco, Antofagasta, BHP, RT, Glencore, Anglo American, Southern Copper, Teck, Vale, first quantum and oz Minerals) successively announced the output of copper ore in the second quarter of 2020. We have made tracking and summary on this. The 12 mining companies produced 4.718 million tons of copper concentrate from January to June 2020, with a year-on-year decrease of 85000 tons or 1.8%. The output of mineral copper of these 12 major mining companies in 2019 accounts for 46% of the whole world.
Compared with ICSG's forecast of reduction in copper concentrate production in 2020, production guidance of major mining companies in 2020 and actual production data of major mining companies, we believe that copper output of major mining companies is higher than market expectation.
As for companies, we will focus on the half yearly reports of Antofagasta, Codelco and Glencore.
Antofagasta, a mining company, was the focus of market attention in July, because its two copper mines, zaldivar and centinela, announced a strike on July 11 and 13. After the intervention of the Chilean government on July 15 (there have been many copper mine strikes in Chile in recent years, and the Chile government has become more and more experienced in responding to strikes), the two copper mine trade unions took over on July 26 and 27 With the new contract, the risk of strike is relieved. On July 22, Antofagasta released its semi annual report, saying that it would maintain the 2020 production target guidance unchanged based on the assumption that there was no epidemic related shutdown in the second half of the year.
Codelco's copper output in the first half of the year increased by 4.7% or 36000 tons on a year-on-year basis against the background of declining ore grade, old equipment and severe epidemic situation in Chile. Codelco said: "the early measures taken by the company to protect the health of workers enable us to maintain the continuity of operation.". There is also an incident about Codelco. A small group of members proposed to sell the company to raise funds for coping with the coronavirus epidemic. This proposal was excluded by the Chilean government. This indirectly shows that if the epidemic situation does not appear to be extreme, it is difficult for the Chilean government to introduce the same epidemic control measures as in March, after all, the Chilean government is facing greater debt pressure.
Glencore lowered its copper production guideline in 2020 from 1255 + - 45000 tons to 1255 + - 35000 tons when the second quarter report was published. The cumulative copper production of the company from January to June decreased by 588000 tons, 11.3% or 75000 tons on a year-on-year basis. This was mainly due to the stoppage of African copper project and Antamina copper mine in Peru in April, and the production resumed in late May. Due to the Xinguan epidemic and low copper prices, the company had planned to suspend production at its Mopani copper mine in Zambia, but the proposal was rejected by the Zambian Ministry of mines. This also shows that under the background of global economic growth shrinking, the pressure of resource countries is relatively large, and there is no extreme situation. It is estimated that it is difficult to introduce control policies like those at the beginning of the second quarter.
From January to June 2020, Peru's cumulative copper production was 874000 tons, a year-on-year decrease of 19.5% or about 210000 tons. In late May, Peru's epidemic situation control measures were gradually lifted, and by the end of June, the mine production capacity returned to 80% before the epidemic. We can see that Peru's copper production in May was 115000 tons, with an increase of 3000 tons on a month on month basis. In June, Peru's copper production further rebounded to 180000 tons; From January to June 2020, Chile's cumulative production of copper is 2.859 million tons, with a year-on-year increase of 2.7% or 74000 tons. The data of Peru and Chile in the first half of the year are basically consistent with the output of major mining companies, and the actual output of copper mines is better than expected. If there is no mandatory epidemic control measures in the second half of the year, the estimated copper output may be more optimistic.
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