The Value Chain of Copper – from Mine to Application

Understanding

Copper

The Value Chain of Copper –

from Mining to Application

Bernd E. Langner

Webinar, European Copper Institute , 4th December 2014

Understanding

Copper

As an association, the European Copper Institute is

unable to provide information regarding future supply/

demand and price forecasts

Price and cost data contained in this presentation are

the views of the author, are historical and for illustrative

purposes only

Webinar, ECI, Value Chain of Copper, 4th Dec. 2014

Understanding

Copper

Mining Smelting and Refining

Scrap Processing

Solventextraction/Electrowin

ning (SX/EW)

Ore/Concentrate Cathodes First Use: Wire Rod, Shapes

Semis: Strip, Wire, Tubes, Bars, Profiles

Processes

Values

The Way from Mining to Application

19 % (3.8 Mio. t)

64% (12.8 Mio. t)

17 % (3.5 Mio. t)


Understanding

Copper The Copper Industry is Highly Fragmented

Copper: Mining Companies

Smelters and Refiners

Wire Rod/Shape Producers

Semis/Cable Producers

Aluminium: Aluminium Producers

Steel:

Steel Producers

Mining Companies


Understanding

Copper

Fragmentation of the Value Chain:

The Reasons ...

The Reasons:

Copper: The final Product of Refining is the Cathode:

• It is solid

• It can be traded

• It can be stored

• It can be transported

• It has to be melted before casting

Aluminium: The final Product of Refining is a Liquid:

• It is liquid

• It cannot be traded

• It cannot be stored over a long time

• It cannot be transported over long distances

• It can be casted directly to billets, bars, and shapes

Copper: Historical Reasons

• Before electrical applications copper products were produced by a

lot of small family owned companies, which partly still exist

• Electrolytical Refining is a total different process than casting or

pyrometallurgical refining


Understanding

Copper

Fragmentation of the Value Chain:

... and the Consequences

The Consequences:

• Copper is the most traded Metal in the World

• Hedging plays an important role between all parts of the

Value Chain

• Copper Price is volatile but the risk can be hedged effectively

• Copper is sometimes a victim of speculation

• Transportation Costs are important

• Consolidation is discussed since more than 20 years, but has

happened only within the mining industry


Understanding

Copper

The Value Chain of Copper:

Where to start?

Ore

Concentrate

Anodes Cathodes

Wire Rod/Shapes

Semis

The Base of all Calculations

in the whole Value Chain of Copper is the

LME Registered Cathode:

• Costs

• Revenues

• Prices


Understanding

Copper The LME Registered Cathode

Trading at the

London Metal Exchange

Requirements for Registration:

• Limits of impurities, e.g. Bi<2 ppm, Antimony <4ppm, Te < 2ppm

• Must have been in the market since at least one year

• Production at least 15,000 tons/year

• Practical Test: Wire Rod Production with 3 Manufacturers with 200 tons each

Drawability, Recrystallization, Conductivity

• Final Decision by the Executive Committee of the LME

Similar Rules for COMEX and Shanghai Future Exchange

There are about 80 registered brands


Understanding

Copper

The Cathode

– Base for all Copper Containing Materials

Raw Material

• Scrap

• Concentrate

• Residues

Value:

+ LME for Copper Content

– Processing Charges

– Penalties for impurities

+ Value of other metals

- Losses

Products

• First Use: Wire

Rod, Shapes

• Strip, Tubes, Bars

• Wire Value:

+ LME für Copper Content

+ Surcharges

+ Premiums (Financing,

Purchasing etc.)

+ Value of Alloying Metals

The Copper Content of a Material can be hedged at the LME by buying and selling cathodes: Contracts can be made for future deliveries for at least 25 t


Understanding

Copper

The First Part of the Value Chain:

Primary Production: Mining of Sulfidic Ores

The First Products with a Value are Copper Concentrates

with 20-35 % Copper Content


Understanding

Copper


Value of Concentrates

Value for Mining Companies with own Smelting

and Refining Plants:

+ LME Price for Copper Content

+ Cathode Premium

- Costs for Smelting and Refining

(+ Sales of By Products)

Value for Mining Companies without own

Smelting and Refining Plants:

+ LME Price for Copper Content

- Treatment and Refining Charges (TC/RCs)

- Penalties for Impurities

- Losses to be paid

+ Paid Value of other Metals


Understanding

Copper


Calculating Costs in the Mining Industry

Cost Items 2008

(US – ct/lb Copper Content)

Codelco

Total Costs and Expenses 178.0

Treatment and Refining Charges

(TC/RCs)

3.8

By Products Credit (e.g. Gold,

Molybdenum)

- 62.2

Net Cathode Costs C3 119.6

Depreciation and Amortization - 29.8

Non operational costs and provisions - 15.6

Direct Costs C1 70.2

C1 Costs can be negative in some cases,

because By Products Credit included in Costs !!


Understanding

Copper

The First Part of the Value Chain: Oxidic Ores

Solventextraction/Electrowinning (SX/EW)

Value for SX/EW:

+ LME Price for Cathodes

+ Cathode Premium

No Valuable By Products!

Technology invented in 1960ies

Now about 19 % of Cathode Production

- No Flotation possible for Oxidic Ores

- Oxidic Ores have got a Value

- Production normally cheaper

than for sulfidic ores


Understanding

Copper

The Second Part of the Value Chain:

The Smelting and Refining Process

1000 kg of Concentrate leads to:

250-350 kg Copper Cathodes

1000 kg Sulfuric Acid

500-700 kg Iron Silicate Stone or Slag

2-3 kg Anode Slime


Understanding

Copper


TC/RCs and Premium in Smelting and Refining

Assumptions Treatment Charge (TC):

60 USD/ton of concentrate

Refining Charge (RC):

6 ct/lb Copper

Copper Content: 30 %

Treatment Charge

(USD/ton Concentrate)

60 USD/ton

Refining Charge

(USD/ton Copper)

0.06*1000/0.454*0.30

= 39.64 USD/ton

Sum: 99.64 USD/ton of concentrate or

15 ct/lb of Copper

Cathode Premium

50-150 USD/ton of Copper

Historical Range of TC/RCs 30/30 up to 130/130

Depending on Concentrate Production and Smelter Capacities


Understanding

Copper


Other Influences for a Smelter and Refiner

Price for Sulfuric Acid historical 10-100 USD/ton

Often less than Costs for Production of

Sulfuric Acid

Metal Gains in

Comparison with Agreed

Losses in the Contract

May be Negative or Positive

Depending on the Process Optimization

and the Composition of the Concentrate

Iron Silicate Stone/Slag Sales: Zero or Disposal Costs

Other By Products e.g. Arsenic: Waste Disposal

Gas Cleaning and

Sulfuric Acid Plant


Understanding

Copper


Comparison between Smelters by Cost Curves

How to read - an Example: 80% of the whole Smelter Capacities have Production Costs less 78 ct/lb


Understanding

Copper


Yield of Copper in Primary Production


Understanding

Copper

A Side-Step in the Value Chain:

Recycling of Copper/Secondary Production

Scrap can be classified in a different way:

• By copper content, e.g. >90%

• By the processing route like refinery scrap, direct melt, brass mill scrap

• By the physical appearance like bare wires, heavy scrap and light scrap

• By the sources of scrap like turnings, electronic scrap, old radiators

3 big groups of scrap

• Production Scrap (New Scrap)

• Old Scrap

• Complex „Scrap“ like

• Electronic Scrap, Residues etc.


Understanding

Copper


Recycling of Copper – What is the Value?

What is the Copper Content?

• Estimation (if >90% Copper)

• Sampling

• Homogenization by Melting a

Sample (Drilling or Sawing,

using the Turnings)

Pricing

• Copper Content minus Losses priced by LME „the

lowest of the Four“: Settlement Buyers and Sellers, 3

Month Buyers and Sellers

• Minus Price for Processing and Refining (if Refining

Scrap)


Other Materials

• Electronic Scrap: Sampling, Precious Metals

• Residues: Sometimes without payment

Old Scrap

Normally Copper Content > 90 %

• Electrorefined for Cathode Production

• Evaluation by Estimation

• Volatile Processing Charges historical 100-1000 €/ton

Production Scrap (New Scrap)

Normally Copper Content > 99.5 %

(or pure Alloy like Brass)

• Direct Melted for Products without refining

(e.g. for roofing copper, plumbing tubes)

• Often not in the Statistics for Copper Usage

Understanding

Copper


Recycling of Copper


Understanding

Copper

The Third Part of the Value Chain:

Copper Products: Wire & Cable

Wires, Cables Wire Rod Cathodes

Smelters and Refiners Smelters and Refiners (Integrated) Wire Rod Producers (Buying Cathodes) Standardized: 8 mm,ETP Copper Capacity of one Plant: 100.000- 300.000 t/a Surcharge: historical <300 €/t

Cable Companies (Enameled ) Wire Producers High Variety in Products Usage of one Plant: 1.000 -15.000 t/a Price:estimated >1000 €/t + LME Copper

Wire Rod accounts for more than 60 % of the Cathode Usage


Understanding

Copper


Copper Products: Strips, Tubes, Bars,

Shapes

Cathodes (Smelters and Refiners)

New Scrap (Semis Customers, Dealers) Semis: Strip, Tubes, Profiles, Bars

Semis Producers

High Variety of Products, No Standardization More than 200 different Alloys 50 % Scrap during Processing Surcharge(Mainly):Hist. 500-1000 USD/ton Specialties: Hist. >1000 USD/ton Delivery Times: 3-8 Weeks

Semis have only 30 % of the

Copper Market but a huge variety

In Geometries, Alloys and Qualities


Understanding

Copper


Copper Products: Pricing and Costs

Pricing: LME Copper Price + Premium + Surcharge Or Copper Price Including Financing and Purchasing Costs1) +Surcharge 1)Different Quotations of Companies in different Countries like: Germany: DEL-Quotation, MK-Ouotation Italy:Milano-Quotation United Kingdom: CRMV Often based on 100 kg

Pricing has to Cover: Operational Costs + Financing Costs + Costs for Scrap Financing Costs are big especially for Semis: Processing time (strip): 3-8 weeks Stocks because of a big variety of products for a huge number of applications Payment Terms have to finance also the metal value Processing Scrap rate of about 30-60 %


Understanding

Copper


Processing Scrap Rates are high


Understanding

Copper


Financing Costs are High for Semis


Understanding

Copper

Historical Revenues in the whole

Value Chain of Copper


What is the future?

There are Challenges ....

0

1

2

3

4

5

6

2002200320042005200620072008200920102011201220132014

Ratio Copper Price/Aluminium Price

Substitution by Aluminium for Conductors Substitution by Zinc, Plastics, Steel in Roofing and Plumbing

But you have to compare the System - not only the Conductor

Understanding

Copper


What is the future?

but many more Chances ....

Understanding

Copper

6605

9983

5000

6000

7000

8000

9000

10000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Production „Worldwide“: Europe, Japan, US, China (1000ts)

Copper is the Metal of the Sustainable Development: Recycling is nearly 100 %

Copper saves Energy

Copper is needed in the Generation, Transformation and Transportation of renewable energy

Wire Rod Production has increased by 50 % in the last 12 years –

Inspite of the price increase


Understanding

Copper

You want more Details ?

The whole Value Chain of Copper

on 375 Pages in my Book or

in special Workshops:

Understanding Copper – Technologies, Markets, Business

www.understanding-copper.com

Write to

[email protected]

Thank you for Your Attention

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Understanding

Copper