HuaFu Securities: October copper mine imports fell month-on-month, processing fees remained stable at a low level

According to the Zhitong Finance APP, Huafu Securities released a research report stating that the copper ore import volume in October was 2.31 million tons (Chile 651,000 + Peru 642,000), a month-on-month decrease of 121,000 tons/-5.0%; from January to October, the copper ore import volume was 23.385 million tons (Chile 7.469 million + Peru 5.894 million), a year-on-year increase of 777,000 tons/+3.4%. In terms of processing, in October 2024, China's copper product output was 1.967 million tons, a year-on-year decrease of 0.3% and a month-on-month decrease of 2.3%; from January to October, the cumulative copper product output was 18.274 million tons, a cumulative year-on-year decrease of 1.1%. Looking ahead, with the Federal Reserve's direction of interest rate cuts confirmed, the tight balance of copper supply and demand will provide strong support for copper prices; in the medium to long term, as the Federal Reserve deepens interest rate cuts to boost investment and consumption, while opening up domestic monetary policy space, the inflation rebound brought about by loose monetary and fiscal policies after the U.S. elections will support the upward movement of copper price centers.

The main points of Huafu Securities are as follows:

Raw materials: Copper ore imports decreased month-on-month, while copper scrap imports increased month-on-month

1) Copper ore imports and exports: The copper ore import volume in October was 2.31 million tons (Chile 651,000 + Peru 642,000), a month-on-month decrease of 121,000 tons/-5.0%; from January to October, the copper ore import volume was 23.385 million tons (Chile 7.469 million + Peru 5.894 million), a year-on-year increase of 777,000 tons/+3.4%.

2) Scrap copper: 1) Imports and exports: In October, China's scrap copper import volume was 183,000 tons, a year-on-year increase of 28,000 tons/+17.9%, and a month-on-month increase of 23,000 tons/+14.2%. From January to October 2024, the scrap copper import volume was 1.857 million tons, a year-on-year increase of 254,000 tons/+15.8%; 2) Profit: The price difference between refined and scrap copper slightly decreased month-on-month in October, with the average monthly price difference being 1,311.9 yuan/ton, down 214.2 yuan/ton from last month (a decrease of 14.0%), and up 512.5 yuan/ton year-on-year (an increase of 64.1%).

Supply side: October cathode copper production declined, imports rebounded

1. Production: The production in October was 979,800 tons, a year-on-year decrease of 1.2% and a month-on-month decrease of 2.4%, with a capacity utilization rate of 79.61%. From January to October 2024, the cumulative electrolytic copper production was 9.844 million tons, a year-on-year increase of 36,000 tons/+3.3%; 2) Imports and exports: The cathode copper import volume in October was 359,000 tons (Congo 145,000 + Chile 48,000), a year-on-year increase of 26,000 tons/+7.7% and a month-on-month increase of 37,000 tons/+11.4%; the cumulative import volume of cathode copper from January to October 2024 was 3.007 million tons, a year-on-year increase of 187,000 tons/+6.6%; 3) Profit: The average processing fee for spot copper refining this month was $10.5/ton, a year-on-year decrease of $77/ton or -88%, and a month-on-month increase of $5.07/ton or +93.37%; the price of sulfuric acid in October was 377.93 yuan/ton, a month-on-month decrease of 3.14 yuan/ton.

Processing side: Copper product output decreased month-on-month, exports remained flat

1. Production: In October 2024, China's copper product output was 1.967 million tons, a year-on-year decrease of 0.3% and a month-on-month decrease of 2.3%; from January to October, the cumulative copper product output was 18.274 million tons, a cumulative year-on-year decrease of 1.1%
2. Imports and Exports: In October, copper exports amounted to 80,100 tons, an increase of 10,700 tons/+15.4% year-on-year, and a month-on-month increase of 24,670 tons/+3.2%. From January to October, China's cumulative copper exports reached 1,111,800 tons, a year-on-year increase of 29.6%.

End Demand: The apparent demand in October was 1,329,000 tons, a month-on-month increase of 1.4%

End Demand: In October, air conditioner production was 16.202 million units, a year-on-year increase of 14%, while refrigerator production in October 2024 was 8.971 million units, a year-on-year increase of 6.8%; from January to October 2024, the cumulative area of housing starts decreased by 22.6% year-on-year, and the cumulative area of completions decreased by 23.9% year-on-year; in October 2024, the production of new energy vehicles was 1.428 million units, a year-on-year increase of 44.5%; from January to October 2024, the cumulative photovoltaic output was 54,343 million kilowatt-hours, a year-on-year increase of 15.5%.

Macroeconomic Analysis

The U.S. October unadjusted CPI year-on-year recorded 2.6%, slightly higher than the previous month's 2.4%, in line with market expectations; the month-on-month core CPI remained unchanged from the previous month, both at 3.3%. Overall, the Federal Reserve's interest rate cut cycle has begun, and Trump's successful election as president temporarily suppresses copper prices around the "Trump trade," but the long-term trend of loose monetary and fiscal policy in the U.S. remains unchanged.

Investment Suggestions

On the supply side, this week, the spot TC for copper concentrate remained stable at a low level, and attention should be paid to the negotiations for processing fees for long-term contracts in 2025 at the end of the year. On the demand side, the weakening copper prices have stimulated end demand, leading to a significant improvement in new orders for several cable companies. The demand for copper enameled wire from transformers remains strong, and the replacement of old appliances has revived the demand for copper enameled wire in home appliances; the replacement of old appliances and export demand have increased the production scheduling of air conditioners, refrigerators, and washing machines in November and December, thereby increasing the demand for copper pipes. The direction of the Federal Reserve's interest rate cuts is confirmed, and the tight balance of copper supply and demand provides strong support for copper prices; in the medium to long term, as the Federal Reserve deepens interest rate cuts to boost investment and consumption, while opening up domestic monetary policy space, coupled with the inflation rebound brought about by loose monetary and fiscal policies after the U.S. elections, will support an upward shift in copper price levels.

Target Aspects

A-shares: The leading recommendation is Zijin (601899.SH), with flexible attention to Cangge (000408.SZ); other focuses include Luoyang Molybdenum (603993.SH), JCHX (603979.SH), Tongling (000630.SZ), Xikang (601168.SH), Beicopper (000737.SZ), and Jiangxi Copper (600362.SH);

Hong Kong stocks: Pay attention to Minmetals (01208), China Nonferrous Metal Mining (08306), etc.

Risk Warning: Downstream demand may fall short of expectations, and the U.S. economy may face a hard landing