Aurubis well-supplied with copper inputs, ample availability of concentrates and recycling | Hotter Commodities
The copper market is well-supplied from the perspective of a European custom-smelter, with ample availability of concentrates and recycling inputs, the chief executive officer of Germany’s Aurubis, Roland Harings said to Fastmarkets
Speaking in an interview during the annual CESCO industry week in Santiago, Chile, Harings said that copper demand is strong and spurred by key drivers, including its use in the energy transition.
“The copper concentrates market is in surplus, which is no surprise to us. We see, in terms of both quantity and quality, a good supply, and we are fully served with our needs,” Harings said.
“On the recycling side, we see the same with some little niches; generally, the supply side is good too. For Aurubis, the input side is good and strong,” he added.
Aurubis produces more than 1.0 million tonnes of copper cathodes with a purity of 99.99% annually at its operations in Europe. It then processes most of its copper cathodes into products such as wire rod and shapes.
“Wire rod demand in Europe is strong, and this is also not a surprise. Given megatrends such as infrastructure and electromobility, we see solid good demand in wire rod but also in areas of other downstream products like billets, rolling slabs, and flat rolled products,” he told Fastmarkets. “Overall, we see that decarbonization and electrification is leading to higher copper demand,” he said.
This is despite a relatively uncertain macroeconomic backdrop, in which central banks are balancing the need to make inflation-fighting interest rate hikes with the desire to continue growth, plus ongoing concern about the stability of the global banking system.
“For Aurubis, demand is healthy, and the trend of moving away from fossil fuels and growing in renewable energy sources is outweighing some negative effects we might otherwise see from a somewhat sluggish global economy,” Harings said.
But inflationary pressures have not been avoided, with Harings noting that the company has seen a rise in its costs, particularly labor, in recent months.
“The one big challenge we face is with cost increases. We see labor rate increases significantly around the globe – at least in the countries we are active in – and this is a significant structural change,” he told Fastmarkets.
“In some places we are even obliged to increase salaries. This is fueling inflation when you see its impacts on costs,” he added.
Arubis phases out purchases of Russian cathodes
Russia’s invasion of Ukraine has added heavily to the inflationary pressures building up in the euro area during the post-pandemic recovery, pushing up consumer prices, especially for energy and food.
According to Harings, Aurubis has now phased out all purchases of Russian cathode, which it previously bought as part of its trading book to optimize logistics. The company had said that the Russian invasion of Ukraine motivated the decision to end this practice.
“We are not buying any Russian copper cathode. We were able to replace it with other sources, including South American and African material, without any kind of negative impact,” Harings said.
“It’s why I am encouraging my peers – even if there is no embargo on copper imports from Russia – to do the same and not support activities that could ultimately finance the Russian war of aggression against Ukraine,” he added.
According to recent data by the London Metal Exchange, Russian copper in its warehouses totaled 22,575 tonnes as of late March, representing 45% of the total stocks. A month earlier, Russian copper accounted for more than 80% of LME stocks.
Critical raw materials supply gap
Europe has recognized the value of mining and its necessity to create the supply chains for critical raw materials that governments are seeking to achieve, Harings said.
“There’s now a recognition that having more resilient, diversified supply chains for critical raw materials comes with certain consequences, and there’s a necessity for mining to demonstrates it can be done responsibly and sustainably,” he noted.
“As an industry, we have to correct the public’s perception – and the regulators’ – about mining. Industry bodies, such as the ICA, are becoming more vocal about modern mining and the pathway to net-zero. It is not yet all connected but the notion is there, and the industry is taking the right steps in the right direction,” he added.
According to Harings, money is still being invested in supply, including in regions where – until now – there has been more difficult political and financial conditions, such as Argentina. Mining is also being discussed in Germany, which would have been hard to imagine three years ago, he said.
“The government is talking and making plans, but in reality, the industry has to be the driving force. What I am asking for is to get the right conditions for reliable, predictable permitting, the right utilities, the right costs, and the right environmental standards which are not unrealistically extreme,” he told Fastmarkets.
“This kind of permanent discussion with the regulators is ongoing. We don’t expect subsidies – it is up to the industry to make it work – but we don’t expect to encounter blockages either,” he said.
Harings said there is now a clear understanding – assisted by the Inflation Reduction Act in the US and the Critical Minerals Act in Europe – that mining is necessary.
“We cannot transition to a new way of living and doing business with less carbon emissions, without the metals we produce. Recycling is only one part of the solution, not the solution, because it requires much more metal to electrify in order to replace fossil-fuel based energy,” he added.
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