ICSG: Improved scrap supply constrained world refined copper usage growth

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Sheet copper (Foto: © H.D. Volz / http://www.pixelio.de)

Lisbon, Portugal — According to preliminary data of the International Copper Study Group (ICSG), world mine production is estimated to have declined by around 2 percent in 2017, with concentrate production declining by 1.6 percent and solvent extraction-electrowinning (SX-EW) by 3 percent. Mine production fell 4 percent YoY in the 1st half of 2017 due to a series of supply constrains but the situation improved in the 2nd half with output remaining essentially flat YoY but increasing by 10 percent compared to the 1st half 2017.

The reduction in world mine production was mainly due to:

  • a 1 percent decline in Chile, the world’s biggest copper mine producing country which was negatively affected by the strike at the Escondida mine in the first part of the year and lower output from Codelco mines.
  • reductions in concentrate production in Argentina, Canada and Mongolia of 59 percent, 14 percent and 14 percent respectively that were mainly due to lower grades in planned mining sequencing and Argentina’s Alumbrera mine approaching end of life.
  • a 12.5 percent decrease in Indonesian concentrate production as output was constrained by a temporary ban on concentrate exports that started in January and ended in April.
  • and a 12 percent fall in production in the United States mainly due to lower ore grades, reduced mining rates and unfavourable weather conditions at the beginning of the year.

However, these reductions in output were partially offset by 30 percent and 4 percent increases in Kazakhstan and Peruvian mine production respectively, with both countries benefitting from new and expanded capacity that was not yet fully available in 2016. Brazil, Mexico, Myanmar, Spain and Sweden also contributed to world growth. On a regional basis, mine production is estimated to have declined in the Americas by 2 percent, in Asia by 4 percent and in Oceania by 5 percent while increasing in Africa and Europe (including Russia) by 2.5 percent and 2 percent respectively.

World refined production is estimated to have increased by 0.6 percent in 2017 with primary production (electrolytic and electrowinning) declining by 0.15 percent and secondary production (from scrap) increasing by 4.5 percent. Increased availability of scrap allowed world secondary refined production to increase, notably in China. The main contributor to growth in world refined production was China (increase of 5 percent), followed by India (6 percent) and some EU countries where output recovered after maintenance shutdowns in 2016. However, overall growth was offset by a 7 percent decline in Chile, the second largest refined copper producer, where both primary electrolytic refined production and electrowinning production fell. Production also decreased in the third and fourth ranked refined copper producers, namely, Japan (-4 percent) and the United States (-12 percent) mainly due to maintenance shutdowns at several plants. On a regional basis, refined output is estimated to have increased in Africa (1.5 percent), in Asia (3.5 percent) and in Europe (3.7 percent) whilst declining in the Americas (7.5 percent) and in Oceania (15 percent).

World apparent refined usage is estimated to have increased modestly by 0.7 percent in 2017. Improved scrap supply constrained world refined copper usage growth globally in 2017. Preliminary data indicates that world ex-China usage increased by 0.5 percent while Chinese apparent usage (currently representing almost 50 percent of world refined usage) increased by 0.9 percent. Chinese apparent usage (excluding changes in unreported stocks) increased by 0.9 percent as although refined copper production increased by 5 percent, net imports of refined copper declined by 9.5 percent. Among other major copper using countries, usage increased in India and Japan but declined in the United States, Germany and South Korea.

World refined copper balance for 2017 indicates a deficit of about 163,000 t (including revisions to data previously presented). This is mainly due to an almost stagnant situation in world refined copper supply. In developing its global market balance, ICSG uses an apparent demand calculation for China that does not take into account changes in unreported stocks [State Reserve Bureau (SRB), producer, consumer, merchant/trader, bonded]. To facilitate global market analysis, however, an additional line item—Refined World Balance Adjusted for Chinese Bonded Stock Changes—is included in the table below that adjusts the world refined copper balance based on an average estimate of changes in unreported inventories provided by three consultants with expertise in China’s copper market. In 2017, the world refined copper balance adjusted for changes in Chinese bonded stocks indicates a deficit of around 135,000 t.

Regarding copper prices and stocks, based on the average of stock estimates provided by independent consultants, China’s bonded stocks increased by around 30,000 t in 2017 from the year-end 2016 level. Bonded stocks increased by about 15,000 t in 2016. As of the end of February, copper stocks held at the major metal exchanges (LME, COMEX, SHFE) totalled 755.847 t, an increase of 213.318 t (39 percent) from stocks held at the end of December 2017. Compared with the December 2017 levels, stocks were up at the LME (63 percent), at SHFE (45 percent) and COMEX (9 percent). The average LME cash price for February was US-$ 7001.80/t, up from the January average of US-$ 7080.30/t. The 2018 high and low copper prices through the end of February were US-$ 7,202.50 per tonne (on 4th Jan) and US-$ 6,755 per tonne (on 9th Feb), respectively, and the year average was US-$ 7042.92/t per tonne (14 percent above 2017 annual average). Please visit the ICSG website www.icsg.org for further copper market related information.

Please visit the ICSG website for further copper market related information. The March 2018 Copper Bulletin is available for sale (single issues €100/€150, annual subscription €500/€750 for orders originating from/outside institutions based in ICSG member countries).

Source: International Copper Study Group (ICSG)