Guosheng Securities: Copper mining growth slows down, pay attention to changes in copper marginal demand.

Guosheng Securities released a research report stating that the global copper mining exploration investment growth has significantly slowed down, highlighting a long-term trend of tightening supply on the mining side. By 2025, new production capacity will mainly be concentrated in Africa and Asia, but geopolitical risks, infrastructure bottlenecks, and the tightening of environmental policies may delay project implementation. At the same time, the midstream smelting side is constrained by upstream concentrate supply, processing fees continue to decline, and capacity expansion faces the dual pressures of rising raw material supply and environmental costs. From the perspective of industry profit distribution, future profits in the copper industry chain may still be concentrated on the upstream resource side. Looking at the demand side, future copper demand may maintain high levels under the combined forces of stabilizing traditional sectors and continuous growth in the new energy sector, but changes in marginal demand require attention to further policy and industry chain developments. Key points from Guosheng Securities: - Retrospect: Copper pricing gradually switches to supply and demand fundamentals - By 2025, copper pricing logic shifts from being dominated by macroeconomic factors to being driven by supply and demand fundamentals. With the end of interest rate hikes in major global economies, the impact of monetary policies on commodity prices may gradually diminish, leading copper pricing framework to refocus on supply and demand fundamentals. - In the first half of 2024, copper prices rose due to expectations of macroeconomic easing, supply disruptions in the mining sector, and expectations of marginal demand expansion. However, in the second half of the year, as the Federal Reserve implemented interest rate cuts and macroeconomic advantages gradually subsided, coupled with tepid performance on the demand side, copper prices showed a trend of rising and falling. Despite continued supply side tightness, downstream companies showed reduced willingness to purchase high-priced copper, leading to a cautious market sentiment. In the future, copper price trends will be influenced by both macroeconomic policies and supply and demand fundamentals, with signals of demand improvement and policy stimuli becoming key factors for price breakthroughs. - Overall, copper prices fluctuated in 2024 as a result of the interaction between macroeconomic and fundamental factors. However, entering 2025, with the further intensification of supply and demand contradictions, copper prices may increasingly rely on improvements in the fundamentals. Copper Supply: Mining side growth slows down, smelting side awaits capacity clearance - The global copper mining supply pattern is still dominated by Latin America, with Chile and Peru holding core positions. However, copper production growth is slowing down; in comparison, the Democratic Republic of Congo in Africa has become a key area for development by Chinese mining companies, thanks to its high-grade resources and rapid production growth, leading to a significant rise in its position in global copper mining supply. - From an investment perspective, the growth rate of global copper mining exploration investment has significantly slowed down, highlighting a long-term trend of tightening supply on the mining side. By 2025, new production capacity will mainly be concentrated in Africa and Asia, but geopolitical risks, infrastructure bottlenecks, and the tightening of environmental policies may delay project implementation. At the same time, the midstream smelting side is constrained by upstream concentrate supply, processing fees continue to decline, and capacity expansion faces the dual pressures of rising raw material supply and environmental costs. From the perspective of industry profit distribution, future profits in the copper industry chain may still be concentrated on the upstream resource side. Copper Demand: Existing demand stabilizes with growth, focus on marginal demand changes - Global refined copper consumption is steadily growing, with downstream demand mainly coming from the electricity construction, new energy vehicle, and home appliance industries. The electricity infrastructure sector is maintaining resilience in copper demand thanks to the substantial growth in grid investments and additions in wind and solar power capacity; the penetration rate of new energy vehicles continues to rise, positively impacting copper demand; demand from multiple sectors counteracts the drag on copper demand caused by the decline in real estate new construction starts and completions. Overseas, the United States' push for manufacturing reshoring policy is driving growth in copper demand in areas such as new energy vehicles and electricity grid infrastructure, providing a boost to global copper demand growth. - Overall, future copper demand may maintain high levels under the combined forces of stabilizing traditional sectors and continuous growth in the new energy sector, but attention needs to be given to changes in marginal demand in policy and industry chain development. Over the next two years, with the continuous advancement of consumption scenarios such as CHINA POWER infrastructure, photovoltaics, and the popularization of new energy charging stations, as well as the gradual release of overseas demand increments, copper metal consumption is expected to remain at high levels, providing impetus for the further intensification of supply and demand contradictions and upward price elasticity; the global copper balance is expected to continue evolving towards a shortage. Risk Factors - Risks include lower-than-expected downstream demand, slower-than-expected progress in mining projects, calculation errors, and risks of tighter-than-expected Federal Reserve tightening policies, among others.