Existing Circumstances and Outlook for Chinese Copper Industry. Wu Yuneng SVP, Jiangxi Copper Company Limited

Transcription

1 Existing Circumstances and Outlook for Chinese Copper Industry Wu Yuneng SVP, Jiangxi Copper Company Limited

2 1. Existing Circumstances of Chinese Copper Industry

3 Existing Circumstances of Chinese Copper Industry Since 2010,the average annual growth of Chinese copper product is 11.91%, the same growth for refined copper is 10.75%, while only 6.38% for mined copper. During the same period, average annual growth of imported copper concentrate is 17.43%, the same growth for imported anode is 10%, for imported refined copper is 3.68%, meanwhile, imported scrap and fabrication is shrinking. Exported refined copper sees average annual growth as high as 49.12%, while exported fabrication product decrease on annual basis. Cu in Con. Refined Cu Cu Product 1000 t 1000 t 1000 t , , , , , , , Imported Cu Ore & Con. Imported Unwrought Cu and Cu Product Imported Refined Cu Imported Scrap Cu Imported Anode Imported Cu Product Imported Cu Alloy Exported Unwrought Cu and Cu Product Exported Refined Cu Exported Cu Product 1000 t 1000 t 1000 t 1000 t 1000 t 1000 t 1000 t 1000 t 1000 t 1000 t ,468 4,292 2,922 4, ,3755 4,073 2,835 4, ,8274 4,647 3,402 4, ,074 4,541 3,205 4, ,820 4,825 3,589 3, ,293 4,808 3,678 3, ,963 4,950 3,629 3, 来源 : 国家统计局 Wind 资讯

4 Change 1: Copper Smelting in China From Extensive to Intensive Form As the environmental protection standards keep upgrading, non-ferrous metal industries face more and more pressure to protect the environment. We see serious issues regarding the accumulation and random discharge of tailings and red mud. With the expansion of city construction, some smelters are now within the city center area, thus facing extreme strict safety and environmental protection pressure. Major copper smelters in China are in the course of gradually eliminating processing technologies featuring high power consumption, high emission and low efficiency. Clean, high efficient and low consumption technologies are being studied and developed, as a result, energy consumption indexes are well improved. Regulations & Policies Directory of National Hazardous Wastes(2016 Revision) Environmental Protection Law of the People s Republic of China Specifications for Copper Smelting Industry 2014 The 12 th Five-Year Plan for Comprehensive Prevention and Treatment of Heavy Metal Pollution Guidance on Energy Saving & Emission Reduction of Non-ferrous Metal Industry Notice on action plan for preventing and controlling air pollution Emission standard of copper, nickel and cobalt industrial pollutants Standard for pollution control of general industrial solid waste storage and disposal sites Standard for pollution control on hazardous waste storage

5 Change 2: Fabricators Pursue Quality Instead of Scale Although the capacity and output of Chinese copper fabricators has sit in 1 st place in the world for consecutive 14 years, it is well noticed that the industry can hardly satisfy the increasing needs of economy growth, due to its lack of precision and high-quality product. Except for AC inner-threaded tube that takes worldwide leading position, the quality of other product such as strip, tube, rod, section bar and cable is still in medium level. Despite managing to localize the production of low & medium quality product, china imports a great deal of high precision product such as high-end copper foil, copper strip, IC lead-frame copper alloy, copper tube with high heat radiation performance and etc. Copper fabrication industry is facing the transformation from the scale-oriented model to scale and quality balanced model t Copper Rod Capacity 7,480 8,570 10,350 11,620 11,450 11,190 Copper Rod Output 4,550 4,950 5,380 5,650 6,950 6,690 Capacity Utilization Rate 60.83% 57.76% 51.98% 48.62% 60.69% 59.78% Source: Antaike

6 Change 3: Transition from Refined Copper Intensive Import to Raw Material Intensive Import The expansion of China s smelting capacity has resulted in increase of concentrate demand. From 2000 to 2015, China s crude copper capacity had got rapid growth with average annual growth of 450k tons, while from 2016 to 2020, such capacity growth would be moderated to 250k tons. By 2020, still over 1 million tons crude copper capacity will be put into production, which means copper concentrate demand would be lifted through the 13 th Five Years Plan period. In recent 5 years, copper concentrate import has been growing at 22% annually, meanwhile, average annual growth of refined copper import is only 4%. In 2015, 3.59 million tons copper in concentrate was imported into China, surpassed net import of refined copper for the first time, in 2016, it happened again. China s copper import pattern will be turned from refined copper intensive to raw material intensive. 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, % 精铜进口铜精矿进口中国冶炼产能中国冶炼产能增速 Smelting Capacity Smelting Capacity Growth Rate 18.00% Refined Cu Import Raw Material Import 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% , , , , , , , , 数据来源 :Wind

7 Change 4: Consumption Growth From High Speed to Medium Speed Global and Chinese Copper Consumption 2, % 2, % 1, % 30.00% 1, % % 全球铜消费年中国铜消费年中国消费全球占比 % Global Cu Consumption Chinese Cu Consumption Percentage of Chinese Consumption 0.00% From 1990 to 2000, copper consumption growth in China had been stable with 3% averagely Data from:wind After China s entry to WTO and demographic dividend in 2001, Chinese market had evolved into the main drive for global copper demand. From 2001 to 2009, China s average annual growth of copper demand is 13%. With 4 trillion RMB stimulus policy, real estate market well developed and copper consumption growth maintained at high speed. From 2009 to 2014, average annual growth is 9%. From 2015 to 2016, as demographic dividend faded out, China s economy embraced its new norm. Copper consumption growth rate decreased to 3-5 %.

8 Change 4:China s Copper Consumption from Rapid Growth to Medium Growth In long-term, copper utilization usually happens in rapid developing phase of urbanization and industrialization, in such phase copper consumption growth is in accordance with economic growth and then copper consumption growth will gradually fall behind economic growth. Now China has passed high speed growth term and is entering into medium speed growth term. In mid-term(2-3 years), counter-momentum for China s consumption reduction maybe the restart of us infrastructure and One Belt One Road investment on related countries. In long-term, nova economies such as India and Southeast Asian countries will be next driving forces for growth. 220, , , , , , ,000 GDP: 不变价 : 当季值季 Data Source:Wind,Antaike ICSG: 消费量 : 精炼铜 : 中国 : 当月值 : 季季 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 Peak Years Peak Values Consumptions(kt) US Germany Japan South Korea Italy France Spain UK Canada Australia China India 45.8 Brazil 30.9 Total Population 2.82 hundred million 0.82 hundred million 1.27 hundred million 4804 ten thousand 5894ten thousand 6091ten thousand 4595ten thousand 5849ten thousand 3200ten thousand 1965ten thousand 13.75hundred million 12.67hundred million 2.02hundred million Per Capita Refined Copper Consumption(kg)

9 Change 5: Copper Consumption Application in China from Traditional Fields to Nova Fields Such consumption in China mainly concentrates on architecture, electricity, industry, transportation and home appliance fields. Thermal and electrical conductivity of copper is much higher than the counterpart of other metal, only second to the counterpart of silver. Because of such feature, copper has became an important material in electronic and electrical industry. Utilization as follows: -Seawater Cultivation- Seine-22tons/Seine Seashore Cage-4tones/Cage Small Seashore Cage-0.6tones/Cage Copper sea cages can prevent biological adherence and they are easy for maintenance and recycling with long service lives. In 2020, it is predicted that copper utilization amount of sea cages would be over 10 thousand tons. As data from International Copper Association, potential of seawater desalination will be developed rapidly. -Seawater Desalination Copper tubes are with sterilization and anti-corrosion effect. In seawater desalination, seamless copper alloy tubes will be necessary. As water shortages of some seaside areas, seawater desalination will be developed rapidly.

10 Change 5: Copper Consumption Application in China from Traditional Fields to Nova Fields -New Energy Vehicles As national policy planning, in 2020, pure electricity driven and plug in typed hybrid automobiles will be over 5 millions in outputs and sales. One new energy vehicle will use 40-90kg copper which is higher than 20kg copper of a traditional vehicle, at that time 400 thousand tons copper consumption will be driven - Charging Stations As national policy planning, in 2020, newly-added collective charging stations will be 12 thousand and individually distributed charging stations will be 4.8 million, so ratio of vehicle and station will be nearly 1:1. Each AC charging station (slow charging typed) costs 5kg copper while each DC charging station (rapid charging typed) costs 60kg copper, as 20% of them are rapid charging typed, at least 80,000 tons copper consumption will be driven. - Solar Collector According to the data from International Copper Association, the optimistic estimated copper consumption in solar collector application could reach around 72,000 tons. - Air Source Heat Pumps For hot water production and comfort heat supply, they are important equipments in coal-to-electricity transformation to replace equipments with high pollutions such as coal burning boilers. In next five years, driven by environmental protection, this market sector will grow rapidly. As prediction of International Copper Association, in 2020, annual copper consumption will be 50 thousand tons in newly-added markets.

11 Change 6: Growth Diving Force Transferred from Resource to Innovation Global economy is facing important opportunities and challenges of a new round of technology revolutions and industrial reforms. Total amount of Chinese economy is the No. 2 around the world meanwhile pressure in population, resources and environment are higher and higher. To push forward simultaneous developments of new-typed industrialization, information, urbanization and agricultural modernization, innovations driven developing paths should be transferred into as soon as possible. In the past, rapid development of copper industry was relied on traditional population and resources dividends and bias on fixed assets investment which led to outstanding structural contradictions. Smelting growth is faster than consumption growth and overcapacity is significant in copper process industry so integral economic benefit of this industry is low. In future, copper industry should be transferred from resources driven to innovations driven for costs reduction, qualities enhancement and benefits growth. As well as its comprehensive competitiveness should be strengthened by means of technological and management innovations and fostering of innovative talents. Resources Driven Innovation Driven

12 2. Opportunity confronted by China s Copper Industry

13 1. The 13 th Five Years Plan for Non-ferrous Industry( ) Industry Development:Industry growth from the high speed in 12 th Five Year plan period to medium high speed, effective demand aligns with insufficient effective supply. Development Mode:From scale expansion to capacity optimization, new capacity controlment, and self-stimulus reduction in output Drive Factor:Investment shifts from low cost resource to innovative drive. Promoting high-end material and implementing intelligent manufacturing. Table:Demand and Output Prediction - Apparent Consumption in Apparent Consumption 1000 T Average Annual Growth % Output Prediction 1000 T 2020 Apparent Consumption Prediction 1000 T Average Annual Growth % , Refined Copper 11, Primary Aluminium 31, Major Metal Lead 4, Zine 6, Magnesium Gold (in ton) Note: Consumption and output date for copper, lead and zinc includes recycled metal.

14 2. The Belt and Road Initiative The population coverage of the Belt and Road initiative is about 4.4 billion, accounting for 63% of global population, the correlative economic aggregate tops 21 trillion USD, account for 29% of the whole world. The non-ferrous metal reserve around the Belt and Road initiative correlative countries is also top class in the world, namely copper, zinc, aluminum, antimony, etc. Currently, the Belt and Road initiative correlative countries have low copper demand but bear abundant resources, as a fine complementation, China relies on external raw materials. Another great complementation lies in technology side, as the Belt and Road initiative correlative countries suffer from undeveloped mining and China can help improve those countries by transporting its advanced technology and equipment regarding mining, processing, smelting. The State Council has promoted international capacity cooperation in 12 industries, non-ferrous metal industry is one of them. By facilitating international capacity and equipment manufacturing cooperation, it is beneficial to boost domestic economic development, to promote industrial transformation and upgrading, to expand new space for industry development, and to create new drive for economic growth. Promoting international capacity and equipment manufacturing cooperation (12 Key Industries) Steel Ferrous Building Materials Railway Power Chemical Textile Automobile Non- Telecommunic ation Construction Machinery Aeronautics & Astronautics Naval architecture and ocean engineering

15 3. Supply-side structural reform Structural reform on supply-side is the core of the while economic reform in the 13 th Five Year Plan ( ) in China. Such reform should be deepened in copper industry to strictly control smelting and fabricating capacity as to slow down the pace of expansion. Shutdown, transfer or reorganize over-capacity enterprises in those sectors which are not in accordance with national energy consumption, environmental protection, quality and safety standards or in long-term deficit, and clear all enterprises which suffer more than three consecutive years deficit, and are not in accordance with structural adjustment directions by means of assets reorganization, ownerships transactions, shutdown & bankruptcy, especially clear zombie enterprises. Supply Demand Accelerate the process of upgrading and weak links improvement for copper industry, especially for copper fabricating industry. Shifting domestic resources to competitive enterprises, so as to facilitate the industry to obtain healthy and sustainable development. Quality Performance Design

16 3. Outlook

17 1. Improve Industry Integration, Strictly Control Expansion Sprawl Currently China s copper industry is not sufficiently integrated, it is quite necessary to have further integration and encourage key players to improve their competitiveness by M&A. Extensive development is not in favor of sustainability pursuit, so national environmental protection and energy saving policies should be strictly implemented. Structural reform on supply-side in copper industry means to eliminate outdated capacity, to exit excessive capacity, to shutdown deficit capacity, and to strictly control construction of new copper smelting project, medium & low level copper rod and strip project. 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 亿元 % 固定资产投资 : 有色冶炼及加工 同比 %_RHS Date from: Wind Fixed asset investment: Non-ferrous smelting and fabricating China s Smelting Capacity Growth Rate

18 2. Take the initiative to secure resources China suffers copper resources starvation, its 70% copper raw material relies on import, companies should take the initiative to step out of china and secure good mineral resources. Currently most of China s controlled overseas assets are located in south American and African district, in the future, the geographic selection should shift to mid-east Europe, mid-asia, southeast Asia and other Belt & Road initiative countries. The geographic layout of the Belt & Road initiative contains great potential for mineral resources. Among these countries, Kazakhstan, Russia, Indonesia has great copper resources raking at top tier worldwide. In accordance with Innovation, Harmonization, Green, Openness, Sharing principle, facilitate the industrialization and urbanization progress and economic development. Mid-Asia North Asia South Asia East-south Asia Mineral Resources Distribution around the Belt and Road Initiative Countries Date from: Geological Bulletin of China Country Minearal Reserve(t) World Ranking Gold 19,000 8 Kazakhstan Copper 6,000, Lead 11,700,000 6 Zinc 2,570,000 4 Uzbekistan Copper 25,000,000 Mongolia Gold 3,100 Nickel 7,900, Copper 30,000,000 6 Russia Alumina 200,000, Gold 5,000 3 Lead 9,200,000 3 India Lead 2,600,000 7 Nickel 3,100,000 8 Philippine Copper 7,000,000 Alumina 242,000,000 Bauxite 1,000,000,000 6 Copper 25,000,000 9 Indonesia Gold 3,000 7 Tin 800,000 2 Nickel 4,500,000 6 Thailand Tin 170,,000 8 Malaysia Tin Alumina 14,000,000 Vietnam Bauxite 2,100,000,000 4

19 3. Optimize Capacity Layout By Suiting Measures to Local Conditions In China, copper resource is unevenly distributed, so the smelting facility should be constructed near the resource, or near the port, so as to improve profit. China s copper resource is widely distributed, except for Tianjin City, all other provinces and cities contain copper reserve. Refined copper productions in China are focused in east China district, while copper consumption is focused in east China and south China. The top 5 provinces with refined copper output are Jiangxi, Anhui, Shandong, Gansu, Yunnan, account for 66% of total china. The top 5 provinces with copper product output are Jiangxi, Zhejiang, Jiangsu, Anhui, Guangdong, accounting for 73% of total China. The industrial integration needs to be further lifted, and fabricating capacity should be located near the consumption market to have optimized efficient. Top 10-Copper Ore output Top 10-Refined copper output Top 10-Copper Product 数据来源 :Wind

20 4. Green Development, Improve the Level of Comprehensive Utilization Improve the Recycled Resources Utilization Taking copper for example, the average annual recovery growth rate could reach 10% in the coming decades, and recycled copper industry will usher in rapid development. It s necessary to accelerate the development of non-ferrous metals recycling industry and improve the comprehensive utilization of recycled metals. Companies should align themselves with the Belt and Road initiative and Chinese environmental regulation diversification, and speed up the process of setting up overseas recycled metals facility. Strengthen Energy Saving and Emission Reduction Management Gradually replace the existing high energy consumption and highly pollutive production equipment and technology, increase the utilization of clean energy. Push industrial enterprises to switch from coal to gas for fuel, strengthen key technologies and equipment development. Promote the Development of Ecological Environmental Protection Strengthen mine ecological environmental restoring, improve utilization of tailings, furnace slag and other solid wastes. Recover waste heat and pressure, treat and recycle waste water, promote the integrated development of environmental protection and copper industry Table:Economic and Technical Indexes of Copper Smelting Enterprises, first half year of 2017 Index Items Unit Industry average index 1 Copper smelting recovery rate % Copper refining recovery rate % Blister recovery rate % DC power consumption of Cathode kw h/t Power consumption of blister kw h/t Coal consumption of blister kg/t Comprehensive energy consumption of Cu smelting kg ce/t 248

21 5. Promote Industry-Academy-R&D Integration and Development Driven By Talents Insist on integration of Industry-Academy-R&D, introduce into universities and research institutes to jointly carry out subject study, to build collaborative laboratory, to set up Technology Innovation Center and R&Ds. General Secretary of CPC Central Committee, Xi Jinping once emphasized that innovation driving in fact is talents driving. The copper industry should have more opened talents policy, so as to foster talents with high skill, professional technique and management expertise. By taking key industrial science and technology research project as linkage, by function of market mechanism, policy promotion, enterprise operation, we should promote strategic alliance among university, researching institutions and enterprises, so as to achieve integration of Industry-Academy-R&D, and foster more and more talents. Industry-Academy-R&D" Cooperation Industry means enterprises Academy means universities R&D means researching institutions

22 6. Insist on Combination of Informatization and Industrialization, Promote Intelligent Manufacturing Facilitating the deepened integration of informatization and industrialization is the important support for building up a strong copper industry in China. At mine side: create intelligent mining mode. There are very few large and super-large mines in China, and mines are featured with low grade, complex ore bodies, high operation cost etc. It s necessary to promote digital mine and intelligent mining mode, which will improve intelligent manufacturing level of nonferrous metals industry, and bring along benefit to reducing mine staff, increasing efficiency, lifting safety control, improving working condition. At smelting side: promote intelligent copper smelting. The Ministry of Industry and Information Technology confirmed and announced 63 pilot demonstration projects for intelligent manufacturing, which consists of many projects from non-ferrous metals industry, and Jiangxi Copper s intelligent plant project in Guixi smelter is one of them. Project Name Intelligent copper smelting pilot demonstration Intelligent alumina factory pilot demonstration High performance lithium battery intelligent manufacturing pilot demonstration High purity crystalline silicon intelligent plant pilot demonstration Applicant Jiangxi Copper Company Limited Shanxi Fusheng Aluminum Company Limited ZhongTian Energy Storage Technology Co.,Ltd XINTE Energy Co., Ltd

23 7. Innovate Management Model by Taking Advantages of Financial Instruments Non-ferrous metal products are not only industrial materials defined by supply and demand, but also investment tools utilized by global politics, economics, monetary policies and financial market. Because of the complex pricing mechanism and high degree of financial integration, we should make good use of financial instruments to manage risks well, and keep a stable business performance. There are rich varieties in the financial market, from inside panel to outside panel, from futures to options, from commodities futures to financial futures, while conducting risk control, we should actively seek to innovate risk control model. Jiangxi Copper has implemented an integrated business mode featuring with the comprehensive integration of spot, futures, financial and risk control, which includes integrated procurement and sales, interactive spots and futures, synergized financial operation, full integration of virtual and real economics, as well as rick process monitoring. Case I: Virtual Mine Build virtual mine by making use of futures market to avoid problems like long period mine acquisition, large capital occupation, and force majeure, etc. We should study the possibility of building virtual mine vie futures market and its operation strategy. Case II: Portfolio Hedging Mode In order to realize a maximum enterprise value, we could regard the assets and liabilities including spots, futures, options, receivables and payables established during the integration of spots and futures, virtual and real economics, as a portfolio, and optimize them through management of the assets portfolio

24 8. Strengthen Formulation of Rules and Standards to Improve Industry Competitiveness Strengthen China s influence in formulation of industry standards, trade rules and pricing rights, improve global competitiveness of Chinese copper industry. Pricing rights: Encourage leading enterprises to grow stronger and bigger, upgrade industry concentration and global market influence. Strengthen industry self-discipline to avoid cut-throat competition, encourage enterprises to participate in international market negotiation under the guidance of industrial association. To promote construction of commodity spot market trading and service platform. Actively cultivate market makers to meet individual requirement of customers, and improve price formulation system. Along with implementation of Belt and Road initiatives, actively participate in and spread cross border and overseas trading and futures business with benchmark price based on China domestic futures exchanges and RMB denominated, to upgrade global position of Chinese non-ferrous metal market as a pricing center. Industrial Standards: Strengthen research and study of new equipment and new technology and formulation of their standards. Strengthen link-up of material manufacturing standards with designing norms and specifications of downstream industries like transportation and electronic information, etc, and also application data handbooks. Actively participate in international standardization work, increase spreading of Chinese standards internationalization, promote mutual recognition of results of authentication and inspection of relevant products.

25 9. Develop New Material and Expand New Application Readjust Structure to Adapt to Development of New Emergent Industry: Along with development of a batch of strategic new emergent industries, enterprises shall strengthen the development of new materials and studies on new applications, and increase valid supply and upgrade efficiency of supply. New Material:Conduct vigorous research and study on key basic materials that could meet the needs of high-end fields including new generation of information technology, aerospace, ocean engineering, rail transportation, energy saving and new energy automobile, etc..for example, sophisticate electronic copper strips, high performance copper foils, copper nickel alloy strip materials, etc.. New Application: Make efforts to promote new applications by seeking support from relevant department to establish extensive cooperation with relevant associations of both domestic and abroad, upstream and downstream industries. Expand the fields like copper-made water pipe for building construction, seawater fishery cultivation, centralized heat supply, etc.,speed up application of high strength and high conductivity copper alloy material, super-high purity oxygen-free copper wires, copper- aluminum composite material, supper-fine copper alloy wires into high-end functional components and advanced power equipment. Copper foil for Lithium Battery Power Battery New Energy Auto

26 Thank You!

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