Copper and Copper Semis Market Intelligence

Industry Outlook & Drivers

Global Market Outlook on Copper and Copper Semis

• Though there is a decline in the demand in some of the key ore producing regions like South America and Australia, there has been an overall increase in demand, of 1 percent, in the copper semis market for 2016
• The Chinese market for production of semis was close to 45 percent in 2015 and covers a broad range of industries. Countries like India and Indonesia have shown a demand increase of 7.3 percent owing to the demand from the electrical industry's growth.
• In 2018, China is estimated to account for the largest share of the world’s copper semis production, holding nearly 47 percent of the global market share. The number of semis plants in China is estimated to be 577

Market Overview Copper Cathodes

Cathode Demand and Supply (MMT) - Global

• The demand increased to reach 24.51 MMT by 2018 growing at a CAGR of 2-4 percent, due to the increasing requirement from the growing end-use industries
• The world refined production declined by about 1 percent in the first five months of 2019 mainly due to decrease in Chilean, Indian and Zambian output
• These were mostly offset by growth in China, Australia, Brazil, Iran and Poland
• Globally, refined copper usage remained stable. The usage in China grew by around 3-4 percent
• The global refineries’ capacity utilization stood around 85-87 percent

Cathode End Use Demand Share (24.11 MMT: 2018E)

• Globally, the end-use demand for copper cathodes is primarily from the wire rods market. This constituted to nearly 61 percent, followed by the flat rolled products that contributed to 14 percent
• The unclassified items includes cathode rods, bars and ingots, which may be further re-casted and be used for preparation of new variety of alloys
• On the positive side, infrastructure projects across the globe are projecting exponential growth in building and construction, electronics, electrical and automotive industries and this is expected to increse the demand for copper semis.
• However, the demand may be met using copper based alloys or aluminum substitutes when it comes to end use like wires

Copper Market Overview: Copper Wires Rods

Wire Rods Demand and Supply (MMT) - Global

• The demand is expected to increase at a CAGR of 4-7 percent in the upcoming  years, to reach 25.5 MMT by 2018, due to the increase in end-use consumption
• Supply is also expected to have CAGR of 4-7 percent and the demand shortage gap is expected to be filled by recycled copper
• The nature of the market is highly fragmented and the ability of suppliers vary based on the size of the wire, quality of copper and the facilities available for production
• Some of the major suppliers of wires rods include Aurubis, Jiangxi Copper,Jiangru, Nexans, LS group, Free port McMoRan etc

Wires Rods Demand Share (18.2 MMT: 2016)

• Copper wire rods are primarily used in the electrical industry for further being drawn into wires
• Wires may include cables for power transmission, building wiring, communication wiring etc.
• An average copper content in a car is 22 kg, and the length of wires used in a car is nearly close to 1.8 km
• Due to lower thermal expansion and corrosion resistance, several applications like industrial wiring, marine wiring, underground wiring and wiring used in salty environments are copper wires
• Electronics also uses wiring to a minor extent, however the conduction in electronics is mostly using other forms of copper semis

Market Forms of Copper Overview Copper Plates, Sheet, and Strips

Plates, Sheet and Strips: Demand and Supply (MMT) - Global

• The global production of copper plates, sheets and strips grew from 2.8 Million Tons to 3.6 Million Tons, at a CAGR of 6.5 percent during 2012–2015, mainly in conjunction with the increased demand for copper from downstream sectors, like electrical and electronics industry
• The above trend is expected to continue and have a CAGR of 5 percent between 2015 and 2018, and the demand is expected to show a 7 percent CAGR, to increase to 4.99 MMT in 2018
• Asia contributed nearly 65 percent of the market share for production of PSS and some of the primary suppliers across the globe include Aurubis, Wieland Werke, Olin Brass, KME, Poongsan Corporation, Mitsubishi Shindoh, Termomecanica, Industrias cobre S.a. De C.v.

Global Copper Semis Drivers and Constraints

Drivers:

End Use Market

Major end-use industries such as construction, consumer electronics, automotive, medical and powder metallurgy are showing a positive growth rate (2017-2020) and these industries are expected to drive the demand for copper PSS, tubes, wires, rods and bars, foils and powder respectively.

Technical Advantage Over Substitutes

End-use products such as industrial power cables, automotive radiators and high temperature applications depend on copper due to their high corrosion resistance and low expansion coefficient. This technical advantage is expected to result in driving the market for copper semis like wires, PSS and tubes.

Environment Concerns

Copper is a green earth metal, having a 100 percent recyclability. With growing environmental concerns of depletion of mineral sources, copper semis such as PSS are preferred in the construction industry and this is a very important driver for the copper semis market.

Constraints:

Cost Reduction Pressure

With a growing demand for the end-use industries of copper, a constant pressure has been there to reduce the cost of production of semis. Although prices have shown a decline in 2016, copper proves to be four times more expensive than aluminum, which proves to be a substitute for many applications.

Inefficient Recycling

Though the potential for recycling copper is 100 percent, the global, net effective recycling rate is less than 40 percent as per the Bureau of International Recycling. This essentially creates a supply deficit for copper semis production by almost 5-8 percent annually and globally identified sources of mines are expected to start production only by 2018 to meet this demand. This scenario drives the end-use markets to look into aluminum substitutes and there by proves to be a market constraint for copper semis.

Cost Structure - Copper Semis

• Production of copper semis depends primarily on the raw material from smelters and refiners. Most of the mining companies also have smelting and refinery facilities to supply end products as cathodes
• Semis producers, who procure cathodes, may also have casting facilities for alloy preparation and equipment for metal forming. These facilities are power intensive and forms the second major component of the cost of production

Procurement Best Practices

Long Term and Spot Market Contracts

• The alloy composition being controlled at the casting stage, integrated suppliers with clarity on their annual demand preferred annual or biennial contracts for procurement of cathodes. This generally has suppliers of copper semis like PSS, rods bars, ingots and billets
• With a provision for hedging in LME, semis producers with casting capabilities can realize cost savings during an increasing copper current price trend
• Service centers without casting facilities however do not prefer to go on long term contracts and prefer buying their pre-rolled copper products such as wire rods, powders, flakes, foils at spot markets