INTL COPPER CONF 2018: 11 takeaways from Madrid

Meeting in Madrid for its 31st year, the Metal Bulletin International Copper Conference saw speakers and attendees from throughout the value chain meet and discuss the state of the market.

Topics ranged from the structural – that mine ore grades continue to drop – to the topical, as debate over how tariffs and protectionism could affect copper arose.

Metal Bulletin’s European copper team provide a breakdown of some key points and topics that came out of the event.

Mining companies are facing greater hurdles to develop new projects, this is leading to a reluctance to sign off capex at a board level and could exacerbate the forecast mine deficit.

“To build a large volume project from the outset until production is at least ten years, so the capacity today for the mining industry to react to increased demand is not as it was before,” Codelco commercial vice president Rodrigo Toro said.

Among the supply risks is the record number of labor contract negotiations due this year.

Around 2.5 million tonnes of copper output is exposed to high disruption risks this year in Chile, the world’s top copper producing country, according to its national copper commission.

The main disruption this year comes from the country’s 34 labor agreement negotiations that are in process, including the Los Pelambres operations whose workers have just voted to strike, Jorge Cantallopts, director of public planning and research with Cochilco said.

Another downside risk to prices is the heightened protectionism among international governments, which looms over global growth and, in turn, copper prices.

“If there is a tariff for steel and aluminium, it will arrive soon on copper, but we have already been suffering for the past two years,” Marco Calamia of Italian semi products maker KME Group said.

Chinese copper smelting capacity could also go the way of aluminium in the region – where older, outdated smelters are shuttered at the same time as expansions of new production.

“It may make sense, not only because of oversupply in China but because of environmental inefficiency – by a huge amount – of copper smelting capacity in China – old smelters and smelters that small are far from meeting even modest environmental requirements,” Atlantic Copper chief executive officer, Javier Targhetta, said.

Meanwhile Europe’s largest copper smelter, Aurubis, is on the hunt for acquisition targets both in and outside the continent after instigating two key deals already this year, the company’s CEO told Metal Bulletin

A $6,000 per tonne copper price is the optimum level for the industry so that it can avoid substitutions from other materials, Halcor’s commercial director, Panos Lolos, said.

“We acknowledge the need for miners and smelters to be sustainable and viable. But of course that tipping point is necessary for the manufacturers, because there is always a need for new product research and that is the destiny also for the commodity products,” he said.

Substitution to plastics only took case in products like plumbing tubes when prices were high, Lolos said.

“It took them a lot of years only when the price gap was too big to be ignored,” he said.

Although copper prices have continued to hover around $7,000 per tonne, their highest in the past three years, the price of the proportion of metal used in electric vehicles (EVs) was described as “peanuts” by the industry.

“[A higher] copper price does not have any big impact on the fact that we have to use copper in EVs,” Marco Calamia, chief metals officer with KME Group, said.

Nonetheless, copper demand derived from the shift to EVs is expected to be constrained by the availability of other key metals, including cobalt.

“Cobalt is a seriously important part of battery technology.” Tim Biggs, the sector leader of metals and mining at Deloitte UK, said, adding that the current availability of cobalt will be enough for about 5 million EVs by 2030.

Another key theme of conversation running through the conference was copper scrap.

China’s scrap ban, which came into effect this month, has already begun to affect flows and prices for scrap and other materials in the copper markets, a panel of experts said.

“We have seen a rise in exports of the other grades to satisfy demand, because demand is still strong in China,” EMR director Murat Bayram said.

China’s domestic copper scrap output is expected to double over the next seven years to fill the supply gap arising from import restrictions, according to Jinrui Futures general manager, Lu Ganping.

“It will almost completely offset the supply gap arising from the restriction of category-7 copper scrap,” he said.

Meanwhile Europe’s third-largest copper smelter, Atlantic Copper, is striving to achieve a record 1.1 million tonnes of concentrate throughput this year.