Conversations at Fastmarkets’ International Copper Conference in Amsterdam, the Netherlands, on February 26-28 revolved around the impact of the novel coronavirus (2019-nCoV) on copper production and procurement chain, as well as logistics disruptions.
The event made use of technology to enable panelists from Italy’s KME, Germany’s Aurubis and China’s Jiangxi Copper to present their views via video-call despite global travel restrictions.
In Italy, KME chief metal officer Marco Calamia said the climbing Covid-19 cases have not had an impact on operations so far.
The country has reported a surge in infections in recent weeks, including in the Italian regions of Lombardy and Piedmont, where the copper fabricator has staff.
Nonetheless, Calamia said more support measures could be implemented if production and logistics disruptions eventually arise due to the spreading virus over the coming months.
In China, the prolonged containment policies have led to a rise in Shanghai Futures Exchange base metals inventory.
Stockpiles of copper are expected to build up to about 2.5 times the average seasonal first-quarter volume seen over the past five years, because of sustained production and a lack of downstream demand, according to a research note by JP Morgan dated February 27.
Logistics have eventually resumed across provinces, aiding a restart of operations at some copper fabricators, smelters and refineries. As a result, there has been a pick-up in demand for copper intermediate products from smelters hoping to make up for the lost output the month earlier.
Reduced European consumption
Even prior to the virus outbreak in Europe, demand for copper had already dropped significantly in several major European economies, in particular in Germany and Belgium.
Europe, typically, consumes 16% of all global refined copper, but endured a torrid 2019 when demand for the metal dropped significantly in several major economies.
A reduced need for copper in the continent shaves yet more units off of what was expected to be a period of deficit for the metal globally, with February's prolonged quarantine also hitting Chinese consumption.
‘Imbalanced’ trade terms
While uncertainties remain for the recovery in China’s copper industry, panelists at the conference highlighted concerns over the imbalance in trade terms between the west and China, the biggest copper importer and refined copper producer. This has led to louder calls for the European copper industry to guard their interests.
Oriol Guixa, chief executive officer of Spanish copper producer La Farga, cited the low barrier for Chinese buyers to pick up Europe-origin copper scrap compared with the internal quotation system compiled by Chinese domestic scrap suppliers as an example.
China’s scrap renaming policy
This year, the market continued to follow China’s plan to reclassify copper scrap as copper renewable materials from July this year and the impact on copper scrap inflows to China.
Zark Huang, analyst with Jiangxi Copper’s research arm, said 90% of the current copper scrap imports could match the renaming criterion.
The policy aims to exclude the inflow of lower-quality scrap, and Huang expects this to be realized, forecasting an improved copper content in imported metal scrap products from July.
Higher barriers to mining approvals
And processing of copper scrap is not the only part of the chain facing stricter environmental measures.
Over the past two decades, mining approval for both greenfield and brownfield exploration has moved from an average of one year, to around five years due to a rise in community opposition as well as water treatment and issues that could vary across regions.
Additional reporting by Archie Hunter and Hassan Butt in London.