Recently, top political and economic scholars in many countries have made a study and judgment on the post-epidemic world pattern, and they all mention that the global industrial chain will be re-integrated. Their reasoning: The fundamental shock to the world's financial and economic system from the COVID-19 pandemic is the recognition that global supply chains and distribution networks are vulnerable to disruption. Globalization allows companies to organize production on a global scale and get products to market in a timely manner, thereby reducing warehousing costs. If inventory is left idle for more than a few days, it is considered a market failure. The supply is carefully designed, sourced and shipped worldwide. However, the new coronavirus has proved to the world that pathogens can not only infect humans, but also disrupt the entire real-time production system. Given the scale of the losses that the world has experienced in financial markets since February, companies are likely to come out of this outbreak with a conservative attitude towards real-time production models and global decentralized production. As a result, global capitalism is likely to enter a dramatic new phase in which supply chains are moved closer to home and filled with surplus in order to protect against future disruption.

However, I am personally skeptical of this view, especially for the Chinese market, as Huang Qifan said recently: The scale of China's manufacturing industry has now accounted for 30% of China's GDP and nearly 30% of the global manufacturing industry. Although China is known as the factory of the world, the development quality of the manufacturing industry is limited by the original division of labor in the global industrial chain, which has not been very high. Since March, the situation of China's manufacturing industry to resume work and production is uneven, many companies can not resume production due to the disappearance of orders in Europe and the United States, and even face closure; However, we can see that there are also some enterprises orders not only did not decline, but also a relatively large growth, such as the electronic manufacturing industry in Suzhou, Chongqing and other places. Fundamentally, it is because an industrial chain cluster has been formed in these places, and more than 80% of the supporting parts related to electronic manufacturing are produced locally. This clustered production model reduces the risks associated with global sourcing of parts and components, making it more competitive during the pandemic. That is to say, only those industries with relatively complete industrial chain clusters in China will have an increase in orders during this epidemic, and some multinational companies will transfer their orders originally intended to be produced in other countries such as Europe and Asia to such factories in China. Therefore, industrial chain clustering is an important feature of global industrial chain reconstruction in this epidemic, and the industrial chain clusters that have been formed or will be formed in China are the basis for attracting global high-end manufacturing industrial chains to settle in China.

So for the copper industry, will this epidemic also lead to major changes in the global industrial chain?

First, global copper distribution:

The global copper mineral resources reserves are about 70 million tons (metal tons), mainly distributed in Chile (30%), Peru (10%), Australia (13%), Mexico (5%), China (4%) and other countries. There are 11 top copper mines in the world (reserves of copper metal resources ≥30 million tons), 6 of which are distributed in Chile, and the rest are distributed in 5 countries including Indonesia, Mongolia, the United States, Russia and Australia.

Second, global copper smelter distribution:

In 2019, global electrolytic copper production was about 23.45 million tons, mainly distributed in Asia (55.9%), about 13.1 million tons, of which China was 8.94 million tons (68.2% of Asia and 38.1% of the world), and the Americas (19.6%) was about 4.6 million tons, of which the United States was 1.15 million tons (25% of the Americas and 4.9% of the world). Chile accounts for 2.21 million tonnes (48.2% of the Americas and 9.5% of the world), Europe (16.3%) about 3.83 million tonnes, and Africa and Oceania combined 8.2%.

Finally, global copper consumption is distributed by:

Global electrolytic copper consumption in 2019 was about 23.46 million tons, Mainly distributed in Asia (70.2%) about 16.47 million tons, of which China is 12.48 million tons (75.8% of Asia, 53.2% of the world), the Americas (12%) about 2.82 million tons, of which the United States 1.81 million tons (64.5% of the Americas, 7.7% of the world), Europe (17%) about 3.98 million tons, Africa and Oceania combined 1 per cent.

To sum up: there is a serious mismatch in the global copper industry chain, with mines mainly distributed in Latin America (45%), smelters mainly distributed in Asia (55.9%) and consumption places mainly in Asia (70.2%). At present, the main flow of the industrial chain is from the mining end of Latin America to Asia, smelting and consumption in Asia. China needs to import a lot of copper and electrolytic copper; The smelting end of the United States can basically produce and sell itself (1.33 million tons of ore, 1.15 million tons of smelting, and 1.81 million tons of consumption), but there is a gap of hundreds of thousands of consumption that needs to be imported from other countries in the Americas.

Since the global copper resources will not be explored in a large number of places in the short term, the distance between the mining area and the consumption area is quite far, and the power system of the mining area is relatively unstable, we believe that the industrial flow from the mine end to the smelting end will not change because of the epidemic. There may be some changes in the consumption side, and a complete industrial chain from design to production of finished products will be closer to the place of consumption. What is beneficial to China is durable goods such as automobiles. So far, there are still a small number of parts that are not produced in China but must be imported. What is bad for China is that the domestic export of products such as home appliances, on the one hand, will be affected by anti-dumping, on the other hand, it will be affected by traffic disruption and export obstruction, so the probability of this part of production capacity in the future is very large.

Overall, we believe that affected by the buttocks decide the head, as long as the main global copper consumption is still in Asia and China, the general flow of the global copper industry chain will not change, only small repairs will occur.