Global copper market

In 2019, annual average copper price fell by 8% YoY – up to $6,002 per ton. The key negative driver was the uncertainty in the global macroeconomic policy. In particular, the “trade war” between the USA and China weighed the price of copper and other raw materials. A careful analysis of the situation indicates that market participants showed increased sensitivity to negotiations and verbal interventions of the above two countries (see Figure 1). This is affirmed by the fact that the announcement and signing of ‘Phase 1’ trade deal within a short period of time has led to a copper price recovery to $ 6,300 per ton. Thus, most of the decline in 2019 can be described as “exclusively speculative”.

On the other hand, the copper market fundamentals (supply and demand) were also affected directly and indirectly by the “trade war”. Thus, the introduced mutual trade restrictions intensified the economic activity slowdown in China (China's GDP growth in 2019 was 6.1%, as compared with 6.6% in 2018). This led to significant decrease in growth rate of refined copper consumption (+ 0.8% in 2019 according to preliminary estimates, as compared with + 6% in 2018)


In 2019, the copper market balance remained negative, the metal deficit amounted to 377 thousand tons. Supply and demand showed comparative growth rates (+ 0.4% YoY).

A decline in production was recorded in the key countries, such as Chile, Japan and the USA. Growth in China is due to new smelters and increase in the scrap import (by weight of copper).

The supply level was affected by decrease in the world’s copper production. The main reasons of the negative dynamics were strikes, transportation problems, low investments in new and existing projects amid reduction of copper content in ore.

Growth rates of consumption were decelerated as well. It is associated with both decline in consumption growth in China as described above, and decline in demand in Europe and Japan, with structural bottlenecks in the economies.



At the beginning of 2020, copper prices reached 5-month low ($ 5,570 per ton) due to concerns about the negative influence of coronavirus in China on the global economy and, consequently, on the consumption of all raw materials. By the date of this review, quotes began to rally. Such a sharp fluctuation in trends indicates the dominance of the speculative component in this decline. Market has once again displayed high sensitivity to news.

At the same time, as in the case with the “trade war”, negative impact of coronavirus outbreak on market fundamentals is already evident, however, it is hasty to draw unambiguous conclusions about the prospects for the entire 2020 year if there is no confirmed information and statistics.

Production shutdown in the affected region will certainly have an adverse effect on economic growth dynamics. According to our estimates, China's GDP growth rates in 2020 may drop to 5.6% YoY. It correlates with the adjusted expectations of investment banks.

Lower economic activity reduces the expected volume of copper consumption in the region, that forces us to narrow the fundamental price level to $ 6,000 - $ 6,100 per ton (previously, $6,000 - $6,200 per ton). However, even in this case, the average level of copper prices in 2020 may be higher than in 2019 (+ 0.8% YoY). The expected increase in prices is due to measures taken by the PRC government to support the economy, as well as high potential to reduce copper supply.

For a long time we have been focusing on copper supply as a key driver for long-term price growth, but coronavirus promotes this driver also within short-term outlook. Quarantine in China has broken the supply chain in the country. The concentrate stocks stored in the copper smelters’ warehouses before the Lunar New Year, are shortened, while new deliveries are delayed in ports. Sulfuric acid may be another challenge. Enterprises may have problems with its storage as it is impossible to transport.

In this context, low TC / RC rates only worsen the overall financial position of enterprises, forcing them to reduce production occasionally. Experts expect that under these conditions, China Smelter Purchase Team (CSPT) may announce coordinated reduction in smelters’ capacity. It is likely that only state and quasi-state companies that have unlimited access to funding will be able to maintain the new benchmark TC / RC ($62 / c6.2). Private companies may face financial difficulties as Shangong Fangyuan Nonferrous Metal Group[1] did (a large private copper producer with capacity of 750,000 tons). In order to get immediately available funds, the company sold concentrate stocks that led to TC / RC growth on the spot market in January 2020.

Thus, the production of refined copper in China can decline this year due to the coordinated actions of CSPT and the exit of private businesses from the market.

The long-term outlook for copper supply will be affected by increasing negative trends. Whereas spot copper prices continue to be significantly lower than the incentive price ($ 7,000 per ton), it is likely that more companies will delay the new projects.

First of all, it applies to projects with average probability to launch. The production volumes of mature projects that should be launched up to 2026, will not be enough to cover the demand for metal amid a decrease of copper content in ore and depletion of large deposits, even with steady consumption level.  

Most of average probable projects are located in South and North America. These projects should add about 6.5 million tons to the market by 2029, but it is doubtful that all of them will be launched.

The longer the copper price is lower than the Incentive Price, the smaller part of estimated 6.5 million tons will be sold in due time.

As the companies’ investment plans seemed to be quite conservative prior to the fall in prices (see Figure “Capex, D&A  and EBITDA of mining companies”), low commodity prices that push EBITDA, would lower Capex in 2020-2021. At the same time, exploration programs and projects at the earliest stages will be cut. We do not expect sector EBITDA to go down significantly, but the growth trend of 2015-2017 is clearly exhausted. Companies may fix upon efficient allocation of investments, choosing merely first-class high-margin assets. 


Russian Copper Market

At the end of 2019, apparent copper consumption in Russia showed 2.3% YoY growth as a result of expansion of copper wire rod deliveries to the domestic market. Import of copper wire rod is also increasing. However, imports remain insignificant within the Russian sector. On the other hand, exports of these products slowdown considerably, that have a direct effect on the balance calculation of the apparent consumption indicator.

Copper cathode exports continue to grow (+ 6% YoY). Russian exports of rolled products showed a decline. Reflecting the uncertainties for the European automotive industry, copper powders displayed maximum decrease (-19%) among the rolled products range.

Copper production in Russia went up by +1% YoY. The main contribution was made by the Polar Division of Norilsk Nickel (+ 1% YoY), UMMC (+ 3%) and Novgorod Metallurgical Plant, RCC

(+ 18% YoY).

 In 2019, the Russian divisions of Norilsk Nickel produced 431 thousand tons of marketable copper, that is 1% higher than in 2018. Mostly, it is associated with increase in ore production and growth of copper content in the ore of the Polar Division, and use of Kola MMC copper concentrate and Norilsk Nickel Harjavalta plant copper cake for processing at the Copper Plant of the Polar Division. At the same time, overall copper production by Norilsk Nickel also rose due to reaching the design capacity at the Bystrinsky GOK. This project holds on the planned production ramp-up of copper in concentrate, which in 2019 amounted to 43 thousand tons, that is 2 times more than in the previous year[2]


[1] https://www.nasdaq.com/articles/china-copper-smelter-shandong-fangyuan-denies-bankruptcy-speculation-2019-12-12 

[2] The source of data concerning MMC Norilsk Nickel is the company's News Release, assessment of reasons for  change and RCC output  has been carried out by the Analytical Department