[Industry] Downstream demand is turning around and the copper clad laminate industry is showing signs of recovery

Copper clad laminate is the basic material of the electronics industry and the main material for the processing and manufacturing of printed circuit boards (PCB). From the perspective of end use, copper-clad laminates can be widely used in computers, mobile phones, communications, aerospace, automobiles and other fields after surface mounting with electronic components. Therefore, they are also regarded as an important cornerstone of the development of the global electronics industry. 

Sluggish terminal demand has become the main reason for the sluggish performance of the copper-clad laminate market. From the perspective of downstream industries, PC and smartphone production will continue to decline in 2023, and more than 70% of car companies in the automotive industry have failed to meet their established full-year sales targets.

Affected by the short-term impact of the epidemic and chips, China's imported car imports dropped to 799,000 units in 2023, a year-on-year decrease of 8.9%. It has declined for four consecutive years and set a new low in the number of car imports in the past 10 years.

The weakness in downstream demand has also been transmitted to the upstream copper-clad laminate and PCB industries. According to the International Science and Technology Strategy Center (ITSI) of the Industrial Research Institute of Taiwan, China, the global PCB industry will experience a sharp decline in 2023, and the global PCB industry output value may drop by 15.6% to US$73.9 billion throughout the year.

Since the third quarter of 2023, as the downstream industry bottoms out and rebounds, the demand for copper-clad laminates is gradually showing signs of recovery. Sinolink Securities said that from a month-on-month perspective, the PCB industry chain as a whole has improved for three consecutive months since July. The cyclical repair of upstream prices and the improvement of downstream demand have superimposed. It can be seen that the PCB industry chain has gradually stabilized and recovered from the bottom of the cycle. The bank predicts that the unit price of Kingboard laminate panels in the second half of the year is expected to increase by 10% compared with the unit price in the first half. It is expected that the price increase in Q3 and Q4 will return to normal levels for some time.

Raw material costs may remain high

In recent years, as overseas copper-clad laminate and downstream PCB production capacity has been transferred to the mainland, Chinese manufacturers have intensively invested in production capacity, resulting in the rapid expansion of production capacity in the field of basic copper-clad laminates and the formation of overcapacity in conventional copper-clad laminates. The technical barriers in the field of high-performance copper-clad laminates are relatively high, and there is still a considerable trade deficit.

The core raw materials of copper-clad laminates are copper foil, etc. In 2023, the prices of copper foil and epoxy resin, the core raw materials of copper-clad laminates, will be high, causing copper-clad laminate companies to face pressure from both supply and demand sides of the industry.

The trend of copper prices in 2023 will be mainly driven by the macroeconomics. Overseas risk events and interest rate hikes will suppress copper prices, while expectations for a strong domestic economy will provide support to copper prices. Judging from the market conditions of previous years, as a "green metal" necessary for the transformation of new energy, the price changes of copper are highly positively correlated with macroeconomic cycles, inflation cycles and technological innovation.