LME WEEK 2019 - INTERVIEW: Aurubis sees stability in European copper market, diversifies multi-metal strategy

Aurubis, Europe’s largest copper producer, sees the domestic copper cathode market balanced, while the company’s multi-metal strategy will see it better adjust to the region’s changing trade landscape, chairman of the executive board Roland Harings told Fastmarkets in an interview during LME Week.

The German-based producer has had a tempestuous year of change, with a leadership restructuring in June ushering in Harings. The producer’s Future Complex Metallurgy (FCM) project, which was planned to reduce capacity bottlenecks at its Hamburg plant, was also scrapped.

Yet in a market currently characterized by poor demand and fragile premiums, Harings maintained broad stability across the European copper market, with further opportunities for new investment both upstream and downstream still emerging.

“Things in Europe are balanced,” Harings told Fastmarkets. “Looking at previous years’ analysis, I think we have this very common pattern, ahead of the new year there always appears to be a deficit, albeit very small. But compared with the size of the market, around 100,000-200,000 tonnes is really a rounding error.”

While acknowledging a slight downturn in demand compared with 2018, Harings said that Aurubis had no problem purchasing material, be it copper concentrates or scrap, against broadly positive fundamentals in copper.

Meanwhile, the International Copper Study Group’s (ICSG) latest forecast is of a return to surplus in the refined copper market of 281,000 tonnes in 2020, compared with a deficit of 320,000 tonnes in 2019.

For Aurubis, a slightly higher copper price trend could benefit new investment in copper projects both upstream and downstream, according to Harings. This is also supported by the producer keeping its annual benchmark cathode premium in Europe unchanged this year at $96 per tonne, a decision Harings said was justified and supported by customers.

Copper's three-month price on the London Metal Exchange ended up by around 0.7% on Friday November 1 at $5,841 per tonne, compared with the previous day’s closing price of $5,797 per tonne.

“If you look at the long-discussed e-mobility in Europe, I think next year will be quite an interesting year with significant new models coming to market. We see solid demand emerging next year, especially if interest rates stay low. But the overall economic environment has to be good,” Harings added.

Smarter mining needed to see TC/RCs stabilize

Fastmarkets’ copper concentrates treatment and refining charges (TC/RC) index, cif Asia Pacific was most recently assessed at $56.30 per tonne/5.63 cents per lb on November 1, up from an all-time low of $49.20 per tonne/4.92 cents per lb seen on August 30.

Yet TC/RCs have been falling at a greater pace year on year, with Fastmarkets’ index sitting comfortably below the $80 per tonne seen in the fourth quarter of 2018, with margins for smelters softening by more than 40%.

“You have to take one thing into account, 2018 was a very strong year for copper. We noticed from customers that are producing products from our material that the supply chain was filled to the max,” Harings said.

Correspondingly, a continued strain in United States-China trade relations remains a key concern for market participants dealing in copper, with the European cathode market still reeling from an absence of spot demand.

“Everybody was concerned last year about not getting enough supply, and that I think was the breaking-effect that we saw in the first six months of 2019, exaggerating a slight slowdown in activity,” Harings added.

Fastmarkets recently assessed the copper grade A cathode premium, cif Rotterdam at $40-50 per tonne on October 29, maintaining a range it has held since June 11.

But for Aurubis, mining strategies globally need to adjust to the conditions of the market to see margins stabilize, while Aurubis’ shift to a multi-metal strategy has helped soften the blow when looking ahead to 2020.

“Given the supply/demand balance, copper mines have to be reasonable. Everybody has to have their share. Custom smelters need a custom TC/RC to function. We also have to continue to execute our sustainability agenda aligned with that,” Harings told Fastmarkets.

“It is also a challenge when there are more complex concentrates coming to our plants. Easy-to-handle, cleaner concentrates are becoming less available now, therefore you have to share the burden with everyone in the value chain,” Harings added.

Multi-metal strategy gains traction
Aurubis’ acquisition of Belgian-based metal recycler Metallo-Chimique in May helped sow the seeds for what the producer has now titled its multi-metal strategy - one that it now plans to execute as its key business strategy toward metals.

The move, while still awaiting approval from the European Commission in regards to anti-trust and competition laws, will allow Aurubis to now diversify its intake of material and further progress production in line with trying market conditions.

For copper, Metallo’s production of grade-B copper-nickel anodes is a prime example of this diversification. With grade-B anodes holding 3-4% nickel concentrate, Aurubis previously diluted the nickel to create a cleaner, copper-only product.

Yet Metallo’s copper anodes have a key consumption base in Asia, allowing Aurubis to further bolster its flow sheet, while the Belgian recycler also produces some of the world’s highest quality tin, with lead content below 20 parts per million (ppm).

Equally, continued demand for scrap material amid China’s category 6 and 7 ban of imports earlier this year has further justified the Metallo acquisition, in which Aurubis paid $424 million.

“Our acquisition of Metallo has helped also, allowing us to close loops we couldn’t previously close and optimize our flowsheet primarily through the fact that we can now further diversify our material processing,” Harings said.

“What [Metallo] do with their metals and the quality of their material and waste streams are very different to ours. That won’t change in terms of ingoing material, but what we can optimize is the space between our companies. They are able to process very low metal-content streams, we are more high-metal content,” Harings added.

Hassan Butt

hassan.butt@fastmarkets.com

Published

Hassan Butt

November 04, 2019

04:08 GMT

London