Conditions specific to the industry
Aurubis’ business largely takes place on the international copper market and its sub-markets. These vary considerably in some cases.
Copper concentrates are offered on the global market by mining companies and traders. Here, Aurubis is a buyer competing with other primary copper smelters, most significantly from China and Japan.
Aurubis primarily procures copper and metal-bearing raw materials for recycling on the European market. Metal trading companies are the main actors on the supplier side, though some recycling materials also reach us directly from product manufacturers. On the demand side, we mainly compete with other copper and metal smelters, as well as metal processors that also utilize materials for recycling.
The market for copper cathodes is global. Copper cathodes serve as the basis for trade on the international metal exchanges. While Aurubis is one of the largest producers with an annual output of 1.1 million t, it doesn’t hold a significant position relative to the overall market of about 24 million t.
The markets for copper products are also distinctly fragmented, with a number of companies that mainly belong to the cable and wire industries, as well as the semi-finished product sector.
Sulfuric acid, which is produced in the course of our processes, is a particularly important by-product. Customers and competitors in this area are very diverse. The customers include companies in the chemical, fertilizer and mining industries.
Aurubis’ individual markets were subject to various developments during fiscal year 2015/16:
The international copper concentrate market was once again characterized by good availability. This was due first and foremost to the start-up of new projects and expansions at mines, especially in Peru and Mexico, where copper ore mining, and therefore copper concentrate production, increased. The production climate, which was largely without disruptions overall, was also decisive. There were only larger reductions in the Democratic Republic of Congo and Zambia, and export restrictions on concentrates in Indonesia caused some uncertainty. In contrast, there were no larger strikes or extreme weather impacts for the most part. Mining companies reacted to lower copper prices with cost reductions and therefore only saw a need to adjust production due to prices in isolated cases. On the demand side, refined copper output from Chinese smelters increased, but this didn’t lead to a tightening of the market for the raw material, copper concentrate.
On the European market for raw materials for recycling, the fiscal year started with reduced availability of copper scrap. Lower copper prices negatively impacted metal traders’ willingness to sell. An unsatisfactory business trend for other metal scraps also caused collection and processing activities to decline. The situation changed starting in summer 2016, however. The supply improved somewhat as metal traders’ activity increased, a development that initially continued until the end of September 2016. In contrast to copper scrap, the supply of complex raw materials for recycling, such as electrical and electronic scrap, didn’t show any larger fluctuations during the fiscal year.
On the international market for copper cathodes, a good supply of concentrates supported good production results. According to the International Copper Study Group (ICSG), capacity utilization during the first seven months of 2016 was 83 %, almost the level of the previous year. Global output of refined copper rose by 2.8 % in this period compared to the same period of the previous year. China, the USA and Mexico played a significant part in this increase. Outages in central Africa were more than compensated for. Global demand for refined copper increased by about 4 % in the first seven months of 2016. China was the driving force once again, demonstrating a level of economic development in line with the state forecast. Investments in expanding the electricity grid rose by 33 % in the first eight months of 2016, while car sales increased by 13 % in the first nine months. Both sectors are crucial for the use of copper products.
Exchange inventories of copper cathodes increased by roughly 31,000 t to 543,000 t during the fiscal year, and copper inventories in Chinese bonded warehouses were up by 150,000 t to 520,000 t.
According to the ICSG, there was a production deficit of 264,000 t on the global market for refined copper in the first seven months of 2016. After taking seasonal effects and changes to the bonded warehouse inventories in China into account, the deficit was 139,000 t.
On the international market for continuous cast wire rod, which utilizes about 74 % of global cathode output worldwide, there were notable differences country by country, though the aggregated regional view showed a more uniform picture. Demand rose by 2.6 % in both Asia and Europe, and by 2.0 % in North America in the first three quarters of 2016.
The market environment for sulfuric acid was weak during parts of the fiscal year. This was partly due to the demand side, which indicated lower demand in South American copper production and in European fertilizer production. On the other hand, a surplus partially triggered by the expansion of sulfur burner capacities strained the market in some cases. Furthermore, there was high sulfuric acid output in the smelter sector despite maintenance shutdowns.
The copper price on the London Metal Exchange was under pressure in fiscal year 2015/16. After starting at US US$ nbsp;5,178/t, the price hit the fiscal-year low of US US$ nbsp;4,311/t on January 15. As the year went on, copper was usually quoted between US US$ nbsp;4,500/t and US US$ nbsp;4,900/t and ended the fiscal year at US US$ nbsp;4,832/t. The average for the fiscal year was US$ 4,767/t (previous year: US;US$ nbsp;5,933/t).