Li Lan, a consultant at BGRIMM Lilan Consulting Corp: “It is estimated that the consumption of refined copper in China could decrease between 25 and 30% in the first quarter in 2020”

With global consumption of approximately 24 million tons of the red metal, China meets 52% of the demand for copper. That is why everyone is observing each one of the measures that the Asian giant has taken to face the pandemic and the consequences that these entail. The world factory has drastically decreased its pace and the decline in its economic activity is impacting the demand for copper.

To find out how the first quarter of the year has been in terms of production and consumption, the Center for Copper and Mining Studies – Cesco – spoke with Li Lan, a consultant at BGRIMM Li Lan Consulting Corp in China, who comments that according to estimates they manage, “the production of refined copper could decrease 7% in the first quartering 2020 in China”.

The measures announced by China to face the pandemic, among other things, affected the normal operation of Chinese smelters. “According to our survey, 20 primary copper smelters with 4.3 million t/a capacity (half of China’s total capacity) reduced their production in February due to high acid stocks, raw materials and other material supply constraints, resulting in a loss of approximately 120 kt Cu in primary smelter production in the first quarter” explains Li Lan. However, the expert points out that in early March most smelters have returned to normal production levels due to the improved logistics conditions and the recovery of acid demand for the production of phosphate fertilizers.

Regarding the consumption of copper, “it is estimated that the consumption of refined copper could decrease between 25 and 30% in the first quarter”, adds the consultant. “The consumption of this type of copper is suffering more negative impacts due to the coronavirus pandemic than the regular copper production”.

Li Lan explains that given that the Chinese New Year was celebrated earlier this year, most copper and copper alloy manufacturers discontinued production and began the New Year holidays in mid-January to resume production by the end of that month. “However, restrictive measures such as immigration control and mass quarantine delayed the actual resumption of production for mid or late February”.

She says that most manufacturers delayed the return to post-Chinese New Year production by around 2-3 weeks due to the COVID-19 outbreak. Although the majority of wire rod and brass mills resumed their production in mid-March, “this month’s production rates are 20-30% below normal years. These production rates should fully recover in late March or early April”, says the expert, adding that “it is expected that both the production and consumption of semis will pick up strongly in the second quarter, as they would be meeting with deferred orders for the first quarter and downstream customers restock in. The trend should extend into the third quarter”.

On a possible forecast regarding consumption for this year 2020, Li Lan is emphatic. “With so much uncertainty, it is difficult to make a forecast, especially when the COVID-19 virus is spreading outside of China”.

In early March, BGRIMM Lilan Consulting was forecasting a 1-2% drop in refined copper consumption, on the assumption that China could well control the virus outbreak and not have further negative impacts from abroad. “However, we could see a further drop this year in China’s copper consumption with negative impacts, given the low exports generated by COVID-19 that is spreading abroad”.

Palliative measures

Nonetheless, according to Li Lan, positive growth will still be seen in the use of the red mineral in China’s infrastructure sector, where announcements have been made. For instance, SGCC, China’s largest power grid company, revised up its annual spending target by over 10% for new projects in the Asian country and where copper is essential. “New projects related to renewable energy, 5G projects and the construction of data centers will also support the use of copper”, states the expert.

Added to this are other positive news, according to Li Lan. “To ensure the supply of the components of some medical devices, including thermometers, medical fans, robots and related devices to smart healthcare solutions, some electronic product manufacturers have resumed production since the end of January, supporting the demand for copper sheets, copper anodes, connectors and lead frame strips”, she concludes.