Copper (Cu)

Key trends in the copper market

2019: Relatively high prices at the beginning of the year (January–April), supported by reduced extraction from Chilean mines and stable demand for copper from China. Abrupt drop in May–September as escalating trade war between the USA and China gave rise to concerns that demand for metals might fall.

Outlook: Neutral. In the mid-term, the market will remain balanced; a successful outcome of the US–China trade talks and continued global demand may support copper prices in the short term.

Concerns over the possible fallout from the US–China trade war triggered a decline in the price of copper at the end of 2018, which was followed by a period of growth in January and February 2019. The price reached its annual peak of USD 6,572/t in early March. Price growth in 2019 was driven by deficit expectations in the copper market amid production declines in several countries: Chile saw a lower copper content in mined ores, and heavy February rains disrupted production; Indonesia’s Grasberg mine (the largest in the country) experienced reduced output as it switched from surface to underground mining; and a number of mines in Africa were closed.

No. 11 in the copper mining industry (%)
No.11 in the copper mining industry (%)
Refined copper consumption by region (%)
Refined copper consumption by region (%)

Early May marked another round of the US–China trade war, when the US government imposed import tariffs on certain Chinese goods, adding to pessimistic sentiment in the market and causing copper prices to plummet to USD 5,750/t in mid-June. However, a strike at the Chuquicamata mine in Chile helped the price to recover to USD 5,970/t by the end of the second quarter. A lack of progress in the trade deal negotiations between the USA and China, along with a new round of tariffs from both sides put pressure on the copper price, plunging it to a two-year low of USD 5,537/t in early September.

In the fourth quarter, the copper price started to recover on the news of strikes and protests at Peruvian and Chilean mines, and amid reports of falling exchange stocks. The growth was further bolstered by a preliminary trade deal between the USA and China, bringing the price up to USD 6,200/t by the end of December.

The average copper price on the London Metal Exchange in 2019 was USD 6,000/t, down by 8% from USD 6,523/t in 2018.

Average annual copper prices (USD/t)
2015 2016 2017 2018 2019
5,494 4,863 6,166 6,523 6,000
Source: London Metal Exchange (settlement)
London Metal Exchange copper price in 2019 (USD /t)
Source: LME, Company data
  1. Research groups forecast increasing market deficit
  2. Freeport announces reduced output from its Grasberg mine in Indonesia
  3. Codelco reports a decrease in copper output
  4. Heavy rains halt production at some Chilean mines
  5. Glencore shuts down a number of mines in Africa
  6. Trade talks between the USA and China continue
  7. Falling copper cathode imports to China
  8. The USA imposes import tariffs on Chinese goods worth USD 200 bn
  9. Chinese countersanctions, tariffs on US goods
  10. Reports of declining production in Chile
  11. Strike at Chile’s Chuquicamata mine
  12. Chuquicamata strike ends
  13. Increas in copper concentrate imports to China
  14. Extra US tariffs on Chinese imports worth USD 325 bn
  15. Research groups report increasing market deficit
  16. National strike in Peru
  17. News of a reduction in electric grid investment in China
  18. Brief strike at Chile’s Escondida mine
  19. The USA and China sign a preliminary trade agreement (phase 1)

Market balance

In 2019, the refined copper market remained in balance, as in 2018, with the deficit at just 0.2% of the total market volume, or 50 kt. In 2019, total exchange inventories dropped by 13% to 304 kt (351 kt at end-2018), or at little less than five days of global consumption, with off-exchange inventories going slightly up.

Refined copper market balance (kt)
Refined copper market balance (kt)
Source: Company data

Consumption

Given its high electrical and thermal conductivity, ductility and corrosion resistance, copper is widely used in various industries. Up to 75% of refined copper produced globally is used for manufacturing electrical conductors, including various types of cable and wire. Key copper-consuming industries include construction, electrical and electronic equipment manufacturing, power industry, transport, engineering, various equipment and consumer goods production.

In 2019, global consumption of refined copper totalled 23.6 mln t (up 0,3%, or 0.1 mln t, y-o-y) due primarily to stronger demand from cable and wire manufacturers. Growth in copper consumption in pipe, flat rolled products and billet production segments was marginal.

Changes in refined copper consumption by product type ( mln t)
Changes in refined copper consumption by product type (mlnt)
Sources: Company data, Wood Mackenzie

China remains the largest copper consumer globally, with its market share reaching around 51% in 2019 and demand growing by 2%. Experts’ concerns over a potential major slowdown of the country’s economy (in part due to the trade war with the USA) proved unfounded. Refined copper imports to China decreased in 2019 by 6% to about 5 mln t, while copper scrap imports were down by 2% after imposition of restrictive quotas on imports by the government. Copper concentrate imports rose by 12% to 22 mln t, which helped to meet China’s growing consumption needs through the expansion of local production capacity.

Copper demand trends in developed markets were mixed: consumption in Europe (the Group’s key market for copper cathodes) shrank by 3.5% in 2019; in North America and Asia (excluding China), consumption rose by 1%. Russia’s domestic copper cathode consumption grew by 4% in 2019.

Refined copper consumption by industry
First use (%)
Sources: Company data, Wood Mackenzie
End use (%)
Sources: Company data, Wood Mackenzie

Production

In 2019, global refined copper output rose 0.3%, or by 0.1 mln t, y-o-y to 23.55 mln t. The biggest growth came from China, which is firmly on track to deliver smelting and refining capacity expansions. In 2019, refined copper production in China grew by 5% to 9 mln t, while its share in total global output reached 38%. Copper ore mined locally supports just 20% of total Chinese production, with the remaining 80% covered by imported copper concentrates and scrap.

In the rest of Asia (excluding China), refined copper output dropped 3% (with production declines in India and Japan). In North America, it grew by 3.5% (driven by the USA). In South America, it fell by 8% (due to Chile and Peru ramping up concentrate exports to China). In Europe, it slipped by 2%, driven by Germany and Poland. According to preliminary estimates, Russia’s refined copper production declined marginally.

In 2019, global copper production fell 0.2% to 20.7 mln t due primarily to production cutbacks in some Chilean mines and scheduled ramp-down of the Grasberg mine (Indonesia) for technical reasons. The decline was partially offset by the growth of China’s domestic mining industry and the commissioning of the new Cobre Panama project in Panama. About 2.8 mln t of refined copper were additionally produced from previously stockpiled scraps and concentrates.

Copper production (mln t)
Sources: Company data, Wood Mackenzie
Refined copper production (mln t)DRC — Democratic Republic of the Kongo
Changes in refined copper consumption by product type (mlnt)

In 2019, mined production in Chile, the world’s leading producer of copper, declined by 2% y-o-y to 5.75 mln t due to poor weather conditions and short-lived strikes. The output of the state-owned Codelco continued to decline (1.7 mln t in 2019, down 5% y-o-y) due to a lack of investment in older deposits with declining average copper ore grades and technical challenges. Production in Peru grew by 1.5% to 2.4 mln t on the back of the Toquepala mine development.

A 4% growth in Africa’s mined production to 2.5 mln t was mainly due to higher output from mines at the Democratic Republic of the Congo, while Zambia’s mined production slipped marginally.

In 2019, China, which is currently developing a number of smaller mines, ramped up its mined production by 6% to 1.7 mln t. Mined production in Indonesia was almost halved to 0.4 mln t as the Grasberg mine operated by Freeport shifted from open-pit to underground mining.

North America’s production grew by 4% to 2.7 mln t thanks to resumed operations at multiple smaller mines in the USA, Mexico, and Canada, after technical problems in the previous year. According to preliminary estimates, Russia’s copper production increased by about 2%.

The actual growth in refined copper output in 2019 came short of analysts’ forecasts made early in the year due to falling extraction rates. Consumption growth was also below expectations due to the escalation of the US–China trade war. Eventually, the global market remained rather well balanced, with its minor deficit close to initial forecasts.