22 January 2024Deutsche BankResearch Europe Global North America Metals & Mining Metals & Mining Industry Global Copper Date Market Update A make or break year; previews & outlooksA make or break year for a number of global copper equities2024 is shaping up to be a pivotal year for several companies in our global coverage. Teck recently reset its guidance (again), and the ramp-up of QB2 this year will be a key test of the company's operational capabilities. FCX faces a number of strategic challenges and opportunities in Indonesia, as it aims to ramp up its greenfield Manyar copper smelter, negotiate a concentrate export extension and extend its mining rights beyond 2041. Following the potentially permanent closure of the Cobre Panama mine, FM is pursuing several initiatives to bolster its balance sheet, potentially including asset sales, raising equity and M&A. LUN is looking to progress its next key growth project, Josemaria, in Argentina; the company is considering syndication of a 40-50% stake and will provide updated capex estimates later this year. From the majors: we expect GLEN to lower multi-year copper guidance next month and provide a strategic update on the separation of MetalsCo and CoalCo by the end of the year, and following recent deep guidance cuts, Anglo should outline a longer-term recovery pathway for copper volumes. Within, we provide our Q4 previews, valuations and company catalysts for our global copper coverage.Demand outlook: can ex-China pick up the baton later this year?China copper demand growth was strong (>5%) in 2023, driven by EVs, property completions and grid/renewables. For 2024, we forecast growth of 2-3%, although a sharper-than-expected slowdown in completions is a potential downside risk later this year. Ex-China demand remains weak, although with destocking already advanced, the focus will be on whether it can pick up the baton from China in H224. Overall, we forecast range-bound prices in H1, before a global recovery in demand propels prices to $10,000/t in 2025. Key copper indicators shown within.More supply cuts in early 2024Over 600 kt of production cuts were announced in late 2023 in respect of 2024 (Cobre Panama, Anglo, RIO and Vale), and early 2024 has been a continuation of this trend, with FM and Teck both reducing guidance (combined 110 kt reduction). Overall, we believe these cuts have reduced mine supply growth by ~2ppts in 2024 and pushed the market from surplus to deficit, and the market should remain tight from 2025 due to rebounding demand, insufficient project approvals and very inelastic mine supply. Our analysis (Rising capital costs = higher long-term prices) points to a long-term incentive copper price of $9,400-10,600/t.Liam FitzpatrickResearch Analyst+44-20-754-13233Edward GoldsmithResearch Associate+44-20-754-77449Bastian SynagowitzResearch Analyst+41-44-227-3377Deutsche Bank ...
