Page 7 - pd290-Feb21-mag-web

oPInIon

COVID bites into

copper supplies

he deadly coronavirus has taken a rial hasn’t helped. Strained bilateral rela- and, to a lesser degree, community road
Theavy toll on the world’s copper mines. tions between Australia and China have blockages.
Output in key producer countries such impacted Chinese purchases of copper Production recovered to pre-pandem-
as Peru cratered over the second quar- concentrates, which fell to zero in De- ic rates in the fourth quarter with onsite
ter of 2020 as lockdowns and quarantine cember. workforce levels “now in excess of 90%
measures caused many mines to drasti- However, Australia was only the fifth of normal, with expanded COVID safe
cally reduce operations. largest supplier to China in 2019 and al- accommodation options available at site
Recovery has been patchy. Peruvian though constricted trade has exacerbated and in local communities,” MMG said,
mines had just about returned to normal the tightness, the root cause has been But last year’s disruption will have a
run-rates by October, but output in Chile, COVID-19 disruption, particularly in Peru. long tail.
the world’s largest copper producer, start- What is normally China’s second top It was supposed to be “a year of tran-
ed sliding in the third quarter after a ro- supplier after Chile saw mined copper sition for Las Bambas, with an intended
bust first half of the year. production contract by 38% over April focus on continuing to increase mining
Global mine output in the first 10 and May and by 14.5% over the January- volumes to open up additional operating
months of 2020 was still 0.5% lower than October period, according to the ICSG. faces, completion of the third ball mill and
2019 levels, according to the International There is no sign of any short-term al- the development of the [new] Chalcoba-
Copper Study Group (ICSG). leviation of the squeeze on smelter mar- mba pit”.
What was supposed to be a year of gins. Most of that activity will now fall into this
mined supply growth turned out to be the Indeed, it may be getting worse. year “with a return to higher production
second consecutive year of zero growth. China’s Smelter Purchase Team, a volumes in following years,” according
The resulting supply chain stress is grouping of some of the country’s biggest to MMG. Production in 2021 is expected
manifest in this year’s benchmark smelter players, has lowered its floor purchase to come in close to 2020 levels at 310-
terms which are the lowest in a decade. terms to $US53/t and 5.3c/lb for the first 330,000t of contained copper before ris-
There is as yet no sign of a turnaround quarter. ing to 400,000t in subsequent years.
in the raw materials segment of the cop- The Team has considerable negotiat- Although Los Bambas, like other mines,
per supply chain, suggesting full COV- ing muscle, and its quarterly minimum has learned to live with COVID-19, it has
ID-19 recovery could be a protracted af- terms are a strong signal as to the state done so at the cost of deferring expansion
fair. of play in the concentrates market. work.
Treatment and refining charges, which This quarter’s floor terms are down When copper smelter terms were last
are what a smelter levies for processing from $US58 and 5.8c in the fourth quar- this low – 2010 and 2011 – the copper
copper concentrates into refined metal, ter and from $US67 and 6.7c in the first price was at record highs.
are the best indicator of what is going on quarter of 2020. That was no coincidence. The world’s
in the opaque raw materials market. Even this low first-quarter floor may be miners were collectively blindsided by the
And the message is clear. There’s not on the optimistic side, since Fastmarkets strength of China’s demand for industrial
enough concentrate to go around. is assessing the spot market for copper metals. Their inability to respond saw
The benchmark terms for this year’s concentrates at below $US50 and 5c. tightness in the concentrates segment of
shipments fell to $US59.50/t and 5.95c/lb Quite evidently, copper mine produc- the supply chain transmitted into the re-
from what was already a lowball $US62 tion still has a way to go before satisfying fined metal section.
and 6.2c in 2019. They haven’t been this smelter demand. With Chinese demand again booming
low since 2011, another year of mine Supply should improve as mine activity and analysts looking for a strong pick-up
supply stress, when they were settled at normalises along with everything else in in demand from the rest of the world on
$US56 and 5.6c. the wake of COVID-19 vaccination pro- the back of “green” technology roll-out,
Last year’s supply woes coincided with grammes. copper mine supply needs to react.
increased appetite in China as new smelt- The ICSG’s October forecast was for However, if Las Bambas is indicative
ers entered the competition for raw ma- world mined copper production to fall by of operational stresses in the rest of the
terials. 1.5% in 2020 but to come roaring back sector, production is not going to miracu-
That should have translated into more with 4.6% growth in 2021. lously snap back to pre-pandemic levels
concentrate imports. But after increases Things, however, may not be that sim- this year.
of 14% and 12% in 2018 and 2019 re- ple. Just as the world starts to consider the
spectively, imports were down by 1% over Consider the case of the Las Bambas effects of “long COVID-19” on human
the first 11 months of 2020 as smelters mine in Peru. Production last year was health, the copper market needs to start
struggled to source material. 311,000t of copper in concentrate, ac- doing the same for mine supply.
Unless there was a big rebound in De- cording to mine operator MMG Ltd. – Andy Home, Reuters
cember itself, 2020 could be the first year The mine took a 70,000t hit from a
of lower concentrates arrivals since 2011. combination of COVID-19 restrictions
An unofficial ban on Australian mate- on personnel, unplanned maintenance

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