Global copper mine output shrinks 2.4% in first 11 months of 2017: ICSG

The following is an edited release from the International Copper Study Group (ICSG) showing world copper supply and demand for the first 11 months of 2017. For more detailed information, visit www.icsg.org.

World mine production declined an estimated 2.4% in the first 11 months of 2017, with concentrate production declining 2% and solvent extraction-electrowinning (SX-EW), 3.5%.

The decline in world mine production owed to: a 1.6% decline in production in Chile, the world’s biggest copper-mine producing country, which was negatively affected by the strike at the Escondida mine and lower output from Codelco mines; lower concentrate production in Argentina, Canada and Mongolia of 57%, 15.5% and 15%, mainly from lower grades in planned mining sequencing and Argentina’s Alumbrera mine approaching end-of-life; a 14.5% decline in Indonesian concentrate production, with output  constrained by a temporary ban on concentrate exports that started in January and ended in April; and a 12% decline in U.S. production owing to lower ore grades, mining rates and unfavourable weather conditions at the start of the year.

But these reductions in output were partly offset by 30.5% and 3.7% increases in Kazakhstan and Peruvian mine production, with both countries benefitting from new and expanded capacity that was not yet fully available in 2016.

Brazil, Mexico, Myanmar, Spain and Sweden also contributed to world growth.

On a regional basis, mine production declined 2.5% in the Americas, 4.5% in Asia, and 5% in Oceania, while increasing 2.5% in Europe (including Russia) and staying the same in Africa.

World refined production increased 0.5% in the first 11 months of 2017, with primary production (electrolytic and EW) declining 1.5%, and secondary production (from scrap) increasing 9%.

Increased availability of scrap allowed world secondary refined production to increase, notably in China.

The main contributor to growth in world refined production was China (increase of 5%), followed by India (6.5%) and some EU countries recovering from maintenance shutdowns in 2016.

However, overall growth was offset by a 7.5% decline in Chile, the second-largest refined copper producer, where both primary electrolytic refined production and EW production declined.

Production also declined in the third and fourth world-leading refined copper producers, Japan (-4%) and the United States (-11%).

On a regional basis, refined output increased in Asia (3.5%) and in Europe (3.5%), while declining in the Americas (8%) and in Oceania (15%), and remaining unchanged in Africa (2%).

World apparent refined usage increased a modest 0.6% during the first 11 months of 2017.

Improved scrap supply constrained world refined copper usage growth globally in 2017.

Preliminary data shows that world ex-China use increased 0.3%, while Chinese apparent usage (representing almost half of world refined usage) increased 0.9%.

Chinese apparent usage (excluding changes in unreported stocks) increased, 0.9% as although refined copper production increased 5%, net imports of refined copper declined 9%.

Among other major copper-using countries, usage increased in India and Japan but declined in the U.S., Germany and South Korea.

Copper market balance

World refined copper balance for the first 11 months of 2017 shows a deficit of 195,000 tonnes (including revisions to data previously presented). This mainly owes to an almost stagnant growth in world refined copper supply.

In developing its global market balance, ICSG uses an apparent demand calculation for China that does not take into account changes in unreported stocks [State Reserve Bureau, producer, consumer, merchant/trader, bonded].

To facilitate global market analysis, however, another line item — Refined World Balance Adjusted for Chinese Bonded Stock Changes — is included, and it adjusts the world refined copper balance based on the average changes in unreported inventories by three consultants with expertise in China’s copper market.

In the first 11 months of 2017, the world refined copper balance adjusted for changes in Chinese bonded stocks indicates a 175,000-tonne deficit.

Copper prices and stocks

Based on the average of stock estimates by independent consultants, China’s bonded stocks increased 40,000 tonnes in the first 11 months of 2017 from the year-end 2016 level. Bonded stocks increased 25,000 tonnes in the same period of 2016.

As of the end of January, copper stocks held at the major metal exchanges totalled 670,553 tonnes, in an increase of 128,024 tonnes (24%) from stocks held at the end of December 2017.

Compared with the December 2017 levels, stocks were up at the London Metal Exchange (LME) with 52%; Shanghai Futures Exchange, 9%; and Commodity Exchange, 5%.

The average LME cash price for January was US$7,080.30 per tonne, up from the December 2017 average of US$6,801.16 per tonne.

The 2018 high and low copper prices through the end of January were US$7,202.50 per tonne on Jan. 4 and US$6,905 per tonne on Jan 23, and the year average was US$7,080.30 per tonne (15% above 2017 annual average).