Conditions specific to the industry
We are mainly active on the international copper market and its submarkets. These witnessed the following developments in fiscal year 2018/19:
The international copper concentrate market was characterized by high mining output and thus good concentrate availability. The quota of production losses – due to factors such as extreme weather, strikes, or technological or legislative issues – remained relatively small. Research company Wood Mackenzie estimates this quota at 1.6 % for copper concentrates in 2019 (previous year: 3.1 %) (estimate in October). Mine expansions and reactivations had a positive effect on the availability of concentrate. All told, the 2019 figure for copper mining output should, according to Wood Mackenzie, match that of last year, which amounted to 20.7 million t (copper content).
Turning to the smelter industry, there were numerous production shutdowns in Asia and South America, chiefly due to tighter environmental regulations at local level. Despite this, demand for copper, particularly among Asian smelters, increased due to further expansion in capacity. As a result both of planned and unplanned shutdowns, Aurubis’ activities on the spot market remained minimal throughout the entire duration of fiscal year 2018/19.
Once again, the European market for recycling raw materials has proved favorable, even though the supply volumes of copper scrap in the first half of the year in particular did not match the record high of the previous year. The relatively stable copper price in fiscal year 2018/19 ensured a high volume flow from collection and treatment activities in the metal trade. On the demand side, this trend was complemented by a good supply situation for smelters and other consumers of copper scrap. At the beginning of fiscal year 2018/19, restrictions introduced by China on the import of high-purity copper scrap led to shortages in the European scrap market. As a reaction to the stricter import restrictions in China, some Asian countries increased their processing capacity for copper scrap with low metal contents. As a result, copper scrap exports from Europe to these countries increased temporarily. The situation did, however, ease noticeably in the second half of the fiscal year. Contributing factors here include the Chinese government’s imposition of an import quota on high-purity copper scrap, and the consequent decline in demand among Chinese smelters for European scrap. Simultaneously, the supply of recycling materials from the US increased, since the trade dispute between the US and China and associated tariffs have made the shipment of copper scrap from the US to Asia less attractive. Having begun the year considerably below the previous year’s level, the refining charges for copper scrap in Europe (published by the research firm CRU) recovered, surpassing both the previous year’s comparative value and the multiyear average by March 2019. Complex recycling raw materials such as electrical and electronic scrap were also available in sufficient quantities on the market.
Refined copper output was affected, as in the year prior, by two main factors in fiscal year 2018/19. The first of these was the proliferation of planned and unplanned production shutdowns that took place primarily across Asia, affecting operations in India, China, and Japan, among others. Interruptions to production also occurred in Europe and in Chile. In contrast to these developments, Chinese capacity was expanded, and global refining capacity was utilized well on the whole. According to ICSG, this was at 83 % in the first half-year (previous year: 87 %). Overall, Wood Mackenzie forecasts that global output of refined copper for 2019 will reach a level around 0.3 % above that of the previous year, bringing it to roughly 23.5 million t.
For refined copper demand, Wood Mackenzie expects a level of 23.6 million to be achieved for 2019, a value which only slightly exceeds that of the previous year. Chinese demand for copper is difficult to calculate at present, owing to the uncertainties associated with the current trade dispute and its impact on global growth.
Exchange inventories of copper cathodes remained at comparatively low levels in 2019. After beginning the fiscal year 2018/19 at around 445,000 t, reserves held by the metal exchanges LME, COMEX, and SHFE had reached approximately 424,000 t at its close.
Wood Mackenzie expects a largely balanced global market for refined copper in 2019.
The international market for continuous cast wire rod, which accounts for about 75 % of global cathode output, should continue to grow in 2019 at a rate of 1.7 %, according to CRU. We deliver most of our wire rod to Europe, where an output volume slightly below that of the previous year is forecast for 2019. While the demand from manufacturers of enameled wire reduced considerably during the course of 2019, as, to some extent, did the demand from manufacturers of cable for the automotive industry, there was a steady development of demand from the construction and energy sectors.
The global market for sulfuric acid developed satisfactorily in fiscal year 2018/19. High demand as well as production shutdowns led to a tightening of the market and consequently to high prices over long stretches of the reporting period. However, by the end of the third quarter, the market had cooled noticeably. This development could also be seen in Europe, where gliding averages were less volatile than on the international markets throughout the reporting period, as market information provider ICIS reported.
The LME copper price was characterized by sustained volatility during fiscal year 2018/19, arising primarily from uncertainties related to the continued economic dispute between the US and China. Following a copper price of US$ 6,180/t (settlement) at the beginning of October 2018, the fiscal year closed with an LME copper price of US$ 5,728 (settlement). The lowest price of the year was US$ 5,537 (September 3, 2019). Almost six months prior, the high was US$ 6,572 (March 1, 2019). The average price for the fiscal year was US$ 6,070 (previous year: US$ 6,684).