Smelters eye copper mine buys

Asia's copper smelters, who met last week, decided to make more investments in mines and increase captive feeds to meet the challenges posed by increasing cost and rising copper prices.

Japan, China, Korea and India make up 80 per cent of the world's smelting capacity and 50 per cent of the world's total copper consumption. Asia's smelters met under the auspices of the Asian Copper Club (ACC), which was formed in 2005.

Smelting capacities are concentrated in Chile, Peru, Canada, Argentina and Australia. New mines that went onstream by the end of 2004 will begin supplying copper from the second half of 2008.

With copper prices ruling high, the Asian smelters are looking at ways to deliver the metal at affordable prices. "The club includes miners, who take a longer-term view, even as they undertake contracts to supply copper for July 2007-June 2008," said J P Paliwal, joint executive president, commercial, Hindalco Industries, who chaired the ACC meeting. 
 

EXPANDING REACH Global copper outlook (in '000 tonne)
	Mine production		Refined production		Copper usage
	2,006	2007	2006	2007	2006	2007
Africa	830	1,003	614	746	200	204
North America	2,233	2,473	2,238	2,382	2,999	3,097
Latin America	6,793	7,225	3,568	4,227	565	580
Asean-10	906	888	539	603	794	822
Asia ex Asean/CIS	1,135	1,193	5,853	6,204	7,175	7,881
Asia-CIS	545	569	538	565	107	114
EU-25	713	716	2,330	2,386	4,016	3,845
Europe (others)	872	902	1,278	1,298	1,160	1,191
Oceania	1,140	1,235	483	550	144	150
Total	15,166	16,204	17,441	18,961	17,160	17,884
Source: International Copper Study Group

Average copper prices were very low in the last few years. They were $1,500-1,800 a tonne in 2000-2003, $2,800 in 2004, $3,700 in 2005, while they are now $6,000 a tonne. However, the TCRC (treatment and refining) rates are very low, leaving smelters with lower margins. Rising interest rates and other costs, such as power tariff, have put pressure on the smelters' margins. When supply negotiations begin with miners, the ACC wants smelters to take a longer-term view, keeping in mind the supply from new mining capacities.

The next supply negotiations are due in a couple of months. The club has decided to invest in mines to ensure regular supply of copper for further processing. It is learnt that Hindalco, a unit of Birla Copper, is looking for mines in Afghanistan. Sterlite is also eyeing such opportunities. The Asian smelters are focusing on buying stakes in small and medium-size mines in South America.

Speaking about the issues discussed at the ACC meet, Paliwal said, "We have decided to focus on improving efficiency and technology to cut costs." Three big copper mining companies were also invited as observers at the meet. The Chinese smelters attending the meeting did not see any slowdown in the economy, he added.

Growth in copper smelting in the country is the fastest and, in terms of consumption, the country is among the lowest. India's per capita copper consumption is 400 kg against China's 1,200 kg. The country's smelting capacity, however, grew five-fold in the last 8 years to 9.5 lakh tonne, with Birla Copper's 5 lakh tonne smelting plant the largest in the world.