Aurubis not considering cuts amid low copper TCs, CEO says | Hotter Commodities

That’s because the company has long-term contracts spread across 40 mines globally, meaning it has a wide range of options to draw from in the event of any unexpected supply chains issues, CEO Roland Harings said.

“We have long-term concentrate contracts; we have hardly any spot exposure. We would be probably one of the last to think about production cuts,” he told Fastmarkets during a recent interview at the annual CESCO industry week in Santiago, Chile.

“We have a very diversified supply chain. On the input side for recycling, obviously we have many different types of materials and suppliers, but we are also working on the concentrate side with many, many mines in very different regions,” he said.

“So even if something drastic happens, we have alternatives in place. We always have certain ranges in place in our contracts – for good reasons, because mines are not able to supply exactly the quantities they are supposed to. Then we can look across the portfolio and can pull from certain mines – so if there are logistic or operational issues, we can go to another region and/or mine,” he added.

Harings noted that during the worst days of Covid-accelerated supply chain interruptions, Aurubis had been able to source the concentrate it required in both quantity and quality.

Concentrate supply tightness has pushed TCs to record lows.

Fastmarkets calculated the weekly copper concentrates TC index, cif Asia Pacific at $0.10 per tonne on April 12, a record low, down by 95.65% week on week from $2.30 per tonne. 

TCs are the fees that mining companies pay smelters to have their semi-processed ore – or concentrate – turned into finished metal. Typically, tighter spot supply leads to a drop in spot treatment and refining charges.

The low TCs have already led some smelters in China – many of which have a roughly 20-30% exposure to the spot market – to curtail capacity.

Harings said that new mine capacity would hit the market and ease the current tightness but warned that continuing to run lossmaking smelting capacity would end up distorting market fundamentals.

“The only concern is whether there really is a level playing field, or whether China will just keep producing at non-profitable smelting assets. To what extent will China simply cover smelting costs because copper is so important for other value chains and ecosystems, and will smelters continue to run despite this cost inefficiency?” he said.

“If China continues to make structural losses but continues to produce regardless, they are distorting the demand-supply equation. As a listed company that has to make profit at least in the medium and long-term, we cannot really subsidize or cope with that situation,” he told Fastmarkets.

“So, I think level playing field is critical, and as this will not be the case with China, then there will be something like a decoupling,” he added.

Although talks are still some way off, attention is now turning to the annual benchmark TCs, which were agreed at $80 per tonne between Antofagasta and China’s Jinchuan Group for 2024 in November.

“The interesting question is what the benchmark for next year will be. There is still a while to go, things will happen on the way. But it is important to consider what our relationship to China should look like,” Harings said.

“For raw materials, it cannot be that China, as a state-run economy, is determining what kind of industry we will have in the long-term in the western world,” he added.

In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Sign up today to receive Andrea’s content as it is published.