Accelerated growth in electric vehicle (EV) sales will support copper demand but expanding Chinese smelting capacity could weigh on the global balance, Europe’s largest copper producer Aurubis said during London Metal Exchange (LME) Week.
“[Electric vehicles] will be bought by a huge part of the population. Society is changing and people are looking at their footprint,” Aurubis chief executive Roland Harings said.
“The fundamentals for copper are very healthy, electric-mobility is growing and there is more infrastructure and charging points being built,” he added.
The volume of copper used in EVs far exceeds those in conventional diesel engine cars, and the electrification of transport or “electric-mobility” to reduce global emissions is expected to boost copper demand.
According to the IEA, the volume of copper used in an EV is estimated at 183lb (83kg), compared with 18-49lb (8-22kg) for conventional cars.
But unpredictable “black swan” events and trade wars could severely impact the global economy and potentially hit copper demand growth in the electric vehicle sector, Harings said.
“Demand in 2018 was an excellent year but there were some hiccups in 2019. In the first six months of 2019, there was an overreaction to the US-China trade war in the market, but we have seen stabilisation since summer,” Harings said.
The China-US trade war, which started in early 2018, has continued as the countries have failed to resolve differences in trade policies. Subsequent tariffs and retaliatory measures between the US and China have slowed global trade flows and hit investor confidence. As a result of “high degrees of uncertainty”, the World Trade Organisation cut its global trade growth forecast this year to the lowest in a decade on 1 October.
Despite the global economic uncertainty, copper demand is still expected to grow by 1.75pc on the year to 25mn t in 2020, data from research consultancy the International Copper Study Group (ICSG) show.
While global demand is expected to grow, Aurubis believes China’s growing copper smelting capacity could tip the balance.
“There is no problem with supply and demand, supply and demand is in balance, but there is a problem with oversupply of smelting capacity in China,” Harings said.
World refined copper production is expected to grow by 4pc on the year to 25.6mn t in 2020, mainly driven by smelting capacity expansion in China and improving output in Africa, according to ICSG.
Copper production costs to rise
Aurubis expects copper production costs to rise in the coming years as global mined ore grade deteriorates. In addition, arsenic levels in copper concentrates have been rising but the firm could resolve the issue by blending the complex feedstock in-house prior to smelting.
Chinese smelters required copper concentrates to be blended prior to processing in the smelters. Many copper concentrate cargoes that did not meet China’s standard on the level of arsenic, lead, fluorine, cadmium and mercury level have been rejected.
“The condition of the concentrate is changing all the time, we see more complex concentrates in the market at the moment, and we are able to handle all these complex concentrates. Aurubis is not as exposed compared with other Chinese smelters,” Harings said.
As a result of Aurubis’ ability to treat complex copper concentrates, the firm said that its treatment costs and refining charges (TCs/RCs) — the fee paid by mining firms to smelters for converting copper concentrates into cathodes — are higher than benchmark TCs/RCs in Europe.
The firm hopes to grow its recycling business through the acquisition of Belgian recycler the Metallo group, which is pending regulatory approval by the end of this year.
Metallo, which is being sold by investment firm TowerBrook Capital Partners, specialises in recycling and refining non-ferrous metals from material with lower metal content. The firm has sites in Belgium and Spain.
“The acquisition of Metallo group complements our business. With Metallo we can optimise our total flow sheet, our treatment network. We can go much more towards zero waste. It help us moving towards the circular economy. We are growing our recycling business with Metallo, we can take more scrap and different kinds of scrap,” Harings said.
“The lowest cost is when there is no need for any conversion, and copper scrap with the highest copper content can be directly remelted. Everything that can be directly remelted is remelted today,” he added.
Aurubis is also Europe’s largest copper recycler — more than 40pc of Aurubis’ copper cathode output is produced from scrap, and copper concentrates account for the remaining raw material feedstock.
Aurubis produced 1.162mn t of copper cathode, 774,000t of copper wire rod and 19,600t of shapes in the 2017-18 financial year.