Copper smelting growth is likely in the push to secure supply chains, but the market needs to avoid overcapacity, and the mine side needs to keep up, the chief executive officer of German producer Aurubis told Fastmarkets in an interview during the annual CESCO industry week in Santiago, Chile.
According to Toralf Haag, smelting capacity is shifting away from customers to where mines are located, for various reasons.
Demand for smelting capacity grows in Europe and US
“Countries want to be independent. They want to have their mines and their smelting capacity as close as possible. The whole tariff discussion and geopolitical risks mean each country wants to have their own smelting capacity. It’s just to be independent,” he said.
“So this could trigger more smelter capacity, although the industry needs to be careful that it doesn’t create an overcapacity situation, especially in the Chinese market,” Haag told Fastmarkets.
“But there will be demand for additional smelting capacity in Europe and also in the US, although it takes a long time to build. Aurubis’ recycling smelter in Augusta took four to five years but a primary smelter takes longer,” he added.
Aurubis produces more than 1 million tonnes per year of copper cathodes with a purity of 99.99% at its operations in Europe. It then processes most of its copper cathodes into products such as wire rod and shapes. It will also ramp up a secondary copper smelter in the US state of Georgia this financial year.
Tight copper supply pushes refining charges to record lows
Haag’s comments come as treatment and refining charges (TCs/RCs) remain at record lows in negative territory amid a tightness in concentrate supplies.
Fastmarkets calculated its weekly copper concentrates TC index, cif Asia-Pacific – which represents the mid-point between smelter and trader purchasing numbers – at $(40.20) per tonne on Friday April 4, down from $(37.70) per tonne on March 28, a new record low.
Typically, tighter spot supply leads to a drop in spot TCs/RCs, which are the fees mining companies pay smelters to have their semi-processed ore – or concentrate – turned into finished metal.
While this is inevitably causing some financial pain to smelters, Aurubis is not planning to make cuts at either of its Hamburg, Germany or Pirdop, Bulgaria operations, Haag said.
“We have long term supply relationships and almost all of our raw material supplies covered for this fiscal year. So, we are well-supplied,” he told Fastmarkets. “We have long-term relationships and through our leading technology we are able to process complex materials on good terms,” he added.
Recycling to play a bigger role in copper production
The broader copper smelting industry uses around 75% copper concentrates and 25% scrap as feed, Haag estimated. For Aurubis, that breakdown is around 55% concentrates and 45% scrap based on the cathode output, a figure the company plans to further adjust toward recycling.
“In the long term, it’s going to be split 50:50, which is good for us, because it diversifies our supply base,” he said.
Mining industry must expand to meet growing copper demand
Going forward, the mining industry needs to produce more copper in order to fill a gap between demand and supply, according to Haag.
“Part of the gap will be filled by increasing availability of recycling material, which is in turn going to enhance the circular economy and secures critical raw material supplies. But the bigger part of the gap is to be closed by additional concentrate material through new mine projects, whether expansions or new mines,” he noted.
While the task ahead is vast, Haag said the industry will rise to the challenge to grow mine supply at the required pace.
“There are a lot of greenfield and brownfield projects as well as some mines which are mothballed and can be reactivated. So, I think it can be done,” he added.
In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Read more coverage on our dedicated Hotter Commodities page here.
