Global Copper Market
In 2020, the average copper price reached $6,169/t, which is 3% higher compared to the price of 2019 ($6,008). Basic characteristics of the world’s copper market as well as serious reduction of USD exchange rate in August have become even more important factors that influenced the market growth in spite of extensive quarantine restrictions de-stimulating global markets.
Having treated the pandemic problem most efficiently and pragmatically China has overcome the
production slump in advance of others and become the key country for the global copper market. By different estimates, in 2020, the expansion of copper consumption in the country made up 8 – 9.4%. This happened along with the growth in copper imports by 31% for the last 12 months of 2020 compared to the same index of 2019. Besides, the automobile production in the country broke the record for the period from December 2017 and reached 2.85 mln pcs./month. A rise in refrigerating and air conditioning equipment output in China for January – November 2019 was 6% and 1%, correspondingly, what additionally illustrates the reasons of the growth in copper consumption in the country. Although the measures targeted to stimulate local power industry and taken at the end of 2020 were discontinued, various estimates highlight steadiness of copper consumption growth in the country during 2021: on average, by 1.6% compared to 2020. The new 5-year plan is focused on the projects for modernization of telecommunication system and developing the infrastructure for electric transport as well, i.e. on industries with high copper consumption.
Dynamics of copper consumption outside China in 2021 will follow the path of recovery growth grounded on a low base of 2020. S&P expects the rise in copper consumption beyond the boundaries of the P.R. China by 8% in 2021 and return to pre-pandemic rate of growth in 2022. ICSG’s forecast presumes more restrained growth by 5.5% compared to the level of 2020.
High rates of gain in copper consumption have prompted us to take a fresh look at problems with
copper supply. Almost half of “non-produced” copper in 2020 – about 620kt – is the result of quarantine restrictions that disturbed the logistics of supplies from major mining regions to the regions of metallurgical processing. Against the background of lowering the budgets for geological exploration, this established the basis for aggravation of metal deficit in the global market.
The deficit in 2020 was initially estimated at 60kt, and in 2021, this index may come up to 110kt. Another problem arisen for mining companies was ore depletion and traditional strikes of workers who got an opportunity to bring additional pressure on companies due to discontent with organization of employee protection against spread of infectious diseases. It is supposed that this problem may be aggravated in 2021, which will cause other problems with raw material supplies.Mining companies have navigated the arisen production challenges in diverse ways, but, in general, almost all large producers remained within the predicted production volumes. Dramatic Glencore’s decline in production mainly caused by planned works at Mutanda mine. MMG in Peru faced not only the mentioned above problems with ore quality and quarantine restrictions, but also ran up against activists disabling normal work of the shaft Las Bambas in the course of several weeks in December 2020.
Besides, if the copper prices continue to rule high in 2021, short deliveries of concentrate may be compensated by increasing the volume of copper scrap, the supply of which depends on price level. Goldman Sachs expects that 1-1.2Mt may be additionally supplied to the market if the average copper price is fixed at $7,500/t.
Based on the consensus forecast given below, it is possible to assert that such estimate of the average copper price is not exaggerated. The problem of cutting the budgets for geological exploration will not apparently influence the market in 2021, but will aggravate the situation with raw materials in the long run during 2025-2026. Even taking into regard the current level of prices that is higher than the estimated incentive price, the major part (43%, 1.9Mt/year) of mining projects expected to be developed before 2030 has a “confirmed” status, i.e. actual construction works are not performed yet. It is supposed that high cost of copper will become a significant factor enabling to accelerate the works at some part of these projects. However, on the global scale this will not contribute to solving the problem of increasing deficit. Goldman Sachs forecasts that when peaked, the copper price may reach and even exceed the level of $10,000/t, and pinpoints a particular strategic role of government stocks that can be replenished following China’s suit by buying significant copper volumes by global market mainstream industrialized leaders.
Russian Copper Market
During 12 months of 2020 the copper production in Russia saw a 2% increase compared to 2019. The growth was ensured by UMMC and RСС.
As it follows from the company’s report, Nornickel’s decline in output (-15kt) is mainly related to the structural change in manufactured commercial products, new logic of copper semi-finished products distribution among the company’s divisions, and decrease in processing volumes of copper concentrate purchased from Rosteс State Corporation. Worth to mention the planned rise of Bystrinsky GOK to the copper concentrate production level of 63kt, which brings it close to estimated 67-68kt of copper concentrate annually.
The apparent copper consumption in Russia has contracted by 10% reaching 286kt as compared to 2019. The surplus of copper allowed for the increase in the volume of export deliveries, which was facilitated by more attractive external market conditions. The export of copper rose by 9% and amounted to 742kt, the export of copper wire rod rose by 4% and amounted to 148kt.
 In total, the copper output in Peru declined by 12.5% following the results of the year