The peak consumption season is coming, and non-ferrous metals can be expected to gain momentum
Before and after the Spring Festival holiday, the overall price fluctuations of nonferrous metals at home and abroad were relatively strong, with copper and nickel prices being the strongest. Electrolytic aluminum and alumina prices stabilized and rebounded after falling. In the short term, there is no serious imbalance between the supply and demand of non-ferrous metals, but generally low inventories, expectations of macroeconomic improvement, and the fall in the U.S. dollar exchange rate and interest rates have all supported non-ferrous metal prices, offsetting the negative effects of the seasonal consumption off-season in February. .
Looking forward to the market outlook, most non-ferrous metals will benefit from the seasonal consumption peak season brought about by the replenishment of downstream manufacturing industries, and fiscal policies are expected to be effective, such as affordable housing, "both leisure and emergency" public infrastructure and urban village renovation. Within the construction of "three major projects". In 2024, consumption growth driven by new energy will slow down, and real estate is still in a relatively weak state. The Fed's interest rate cut may not be realized until the end of the second quarter, and it will take time for the lower interest rates to drive consumer and investment demand. Non-ferrous metal prices will rise, but the extent remains to be seen.
Demand will rebound seasonally
In 2023, the demand for non-ferrous metals is still growing overall, especially China's demand, which has exceeded expectations due to domestic policies and the vigorous development of the new energy industry. This is also the result of the reversal of the decline in the price of non-ferrous metals in the first half of the year in the second half of last year. The main reason for the increase.
In terms of copper, data released by ICSG shows that the growth rate of global copper consumption in 2023 will increase by 4.6 percentage points compared with 2022, reaching 27.013 million tons, and the growth rate in 2022 will be 2.5%. According to estimates, China's copper consumption in 2023 will be 16.1 million tons, an increase of 9.8% compared with 2022. The new energy industry will drive significant growth in copper demand, an increase of 52% compared with 2022, accounting for about 19% of national copper consumption. Overseas refined copper consumption will see negative growth in 2023, down 2.3% from 2022. From January to February 2024, downstream demand for copper weakened again, and the operating rates of processing enterprises such as copper rods, copper tubes and copper strips generally declined, and is expected to rebound in March.
In terms of aluminum and alumina, in 2023, China will import 1.542 million tons of electrolytic aluminum, an increase of 131.4% compared with 2022. The growth rate is declining month by month and is the same as in 2021, mainly due to the rapid growth of domestic aluminum consumption. Full-scale domestic aluminum consumption will reach 47.86 million tons in 2023, a record high, an increase of 7.6% over 2022. Consumption growth is mainly caused by the fields of new energy vehicles, photovoltaics and lithium batteries. In 2023, about 5.7 million tons of aluminum will be consumed, an increase of 50% compared with 2022. Among them, the aluminum demand for new energy passenger vehicles will be 2.3 million tons, and photovoltaic consumption of aluminum will be 2.3 million tons. 4 million tons, battery aluminum foil consumes 400,000 tons of aluminum. From January to February 2024, aluminum consumption is also weakening, causing the electrolytic aluminum market to be overstocked. In March, the manufacturing industry will replenish its inventory. Alumina demand is also weakening as the resumption of electrolytic aluminum production in Yunnan in January was less than expected.
In terms of nickel, stainless steel production continued to decline in January. Because the raw material of stainless steel comes from ferronickel, it has little impact on pure nickel consumption. In January, the output of ternary materials increased by 44% year-on-year and 7.7% compared with December last year, driving demand for nickel sulfate to pick up. In March, the manufacturing industry will replenish its inventory, especially the purchase of ternary batteries for new energy vehicles, which will also see seasonal growth.
There are constraints on supply growth
Looking back on 2023, non-ferrous metal inventories continue to decline. It is not just that demand is growing, but more that supply growth is slowing down, resulting in a tight balance between supply and demand or only a small excess. Under the current global energy transformation, low-carbon environmental protection and other policy requirements, the expansion of non-ferrous metal production capacity is restricted, especially electrolytic aluminum and alumina. Copper may be affected by declining copper mine grades, lower capital expenditures and political instability.
In terms of copper, data released by ICSG shows that global refined copper production will increase by 6% in 2023 compared with 2022, reaching 26.927 million tons. Among them, China's copper refining output is approximately 11.6 million tons, an increase of 12.7% compared with 2022. However, global copper mine production will only increase by 1.4% to 22.2 million tons in 2023. Including copper mine production growth in Chile, Indonesia, Panama and the United States was less than expected or declined. In recent years, Chilean copper production has declined due to factors such as declining ore quality, water restrictions and epidemic outbreaks. As copper concentrate processing fees continue to decline in 2024, copper smelting profits continue to decline, which may affect refined copper production in the first quarter. The future growth of electrolytic copper depends on whether the supply of scrap copper can keep up.
In terms of aluminum, in 2023, the growth rate of electrolytic aluminum production at home and abroad will slow down. In 2023, China's electrolytic aluminum production will be approximately 41.594 million tons, an increase of 3.7% from 2022, and the growth rate is the lowest in the past four years. In 2023, global electrolytic aluminum production will be approximately 70.581 million tons, an increase of 2.2% from 2022. From the perspective of production capacity expansion, the Ministry of Industry and Information Technology's "ceiling" limit of 45 million tons on electrolytic aluminum production capacity makes it difficult to expand aluminum production capacity. Overseas, there is almost no expansion of electrolytic aluminum production capacity in Europe and the United States due to environmental protection reasons.
In terms of alumina, in 2023, China's alumina production will be approximately 82.4412 million tons, an increase of 1.4% compared with 2022, and the growth rate will slow down significantly from 5.6% in 2022. In 2023, my country's electrolytic aluminum production will be 41.594 million tons. Based on the consumption of 1.92 tons of alumina per ton of electrolytic aluminum production, my country's metallurgical grade alumina consumption will be 79.86 million tons. Therefore, China's alumina production can fully meet the domestic use of electrolytic aluminum. However, the strike in Guinea once again triggered the market's nerves. Guinea's trade unions submitted a notice for an unrestricted general strike nationwide starting from February 26.
There is uncertainty about the upside potential
The United States wants to sanction Russia, and the market is worried about the supply of Rusal. From the perspective of the global market, although Russia's aluminum production capacity has reached 4 million tons and alumina production capacity has reached 9.5 million tons, China is the world's largest producer of electrolytic aluminum. China's imports of electrolytic aluminum from Russia are very small, with only 100 in 2023. About 10,000 tons. Russian electrolytic aluminum is mainly exported to Europe, but there is little demand for electrolytic aluminum in Europe, which can be imported from China, Australia and the United States. In terms of alumina, Russian alumina exports are very small and are basically used to meet the country's electrolytic aluminum production capacity. Russian alumina can meet its country's electrolytic aluminum production capacity of approximately 4.9 million tons.
To sum up, March to May each year is the traditional peak season for rising manufacturing operations. Nonferrous metals, as important primary industrial raw materials, will usher in seasonal demand recovery. In addition, fiscal and monetary policies gradually took effect in the first quarter, and infrastructure investment and the start or construction of the "three major projects" in the second quarter have a certain boost to nonferrous metal consumption. There are constraints on the supply side, which means that there will be a destocking market in March. However, due to industry standard development, high base and high car ownership, the growth rate of photovoltaics and new energy vehicles is likely to slow down, which means that there is uncertainty in the room for consumption-driven non-ferrous metal growth.
