The copper price started 2022 at around US$9,700/t, increasing slowly over the first three months, with the monthly average AME Europe copper prices increasing to US$10,272/t in March.
In early 2022, manufacturing activity in the most Asian countries, the Eurozone and the US remained in expansion territory as global supply chain bottlenecks eased, and the impact of the Omicron wave of Covid-19 diminished.
In early March, copper prices briefly
touched record highs amid fears that sanctions imposed on Russia, after the
escalated Russia-Ukraine conflict, could further tighten already-tight supply.
Copper prices started to retreat from
April as near-term demand cooled on slowing Chinese growth and rising interest
rates. China’s zero-Covid strategy, coupled with an ongoing crisis in its
crucial property sector, weighed on its economic growth.
In the rest of the
world, more-aggressively-than-expected tightening monetary policy in response
to curb soaring inflation triggered fears of economic recession. The ongoing
Russia-Ukraine war also slowed growth. Copper prices lost more than US$2,000/t
by the end of June.

After touching 20-month lows in mid-July,
copper prices stopped the downward trend, as supply disruptions in major
copper-producing countries, including Chile and Peru, provided some support.
Meanwhile, rising EV production and infrastructure investment, particularly
within the deployment of renewable energy systems, lifted copper demand, and
partially offset the lost in traditional sectors, such as construction,
However, prices were unable to return to the levels seen earlier in the year.
After stablised at around US$7,600/t in
September and October, copper prices began to increase in November, on the back
of growth in the demand outlook as China started to pivot away from its costly
zero-Covid policy.
TC/RCs
US-based miner Freeport-McMoRan and major
Chinese copper smelters have agreed on treatment and refining charges (TC/RCs)
of US$88/t and US¢8.8/lb for copper concentrate supply in 2023. The settlement
is the highest since 2017 and 35.4% higher than the 2022 benchmark of US$65/t
and US¢6.5/lb. The increase in TC/RCs is driven by an expected oversupply of
copper concentrate in 2023.
AME forecasts that the copper concentrate market
will be in surplus of 412kt in 2023, with supply growth at 7.6% to 19,538kt, outstripping
demand growth at 1.8% to 19,125kt. The supply growth is driven by new capacity
ramping up. Meanwhile, primary smelter concentrate consumption will largely
remain stable.

Imports/Exports
During the first eleven months, China’s
imports of unwrought copper and copper products, increased 8.5% year on year to
5.36Mt. The import volumes of copper concentrate, or partially processed copper
ore were 23.17Mt, up 8.6% year on year. The increase in imports was mainly due
to demand expected to rise as local governments ramped up infrastructure
spending to offset a slowdown caused by its zero-Covid policy and property
woes. Lowered stocks, weakness in prices in the second half and opened
arbitrage windows also encouraged imports.
Notably, more copper from Russia has
flowed into China as some buyers have turned to Russian supplies which are
available at a discount to other origin regions. Chile's state-owned Codelco,
the world's biggest copper miner, has made an offer to sell copper to Chinese
clients at a premium of US$140/t in 2023, a rise of 33.3% from US$105/t in
2022. China's buyers have said they might further raise their purchases of
Russian materials.
Codelco and Aurubis have also increased
2023 European copper premiums by 85% to US$235/t and US$228/t, respectively,
reflecting European market’s lower acceptance of Russian copper, putting copper
from other regions in higher demand. More Russian copper is expected to find
its way to China.
Mine Curtailments
In Peru, several mines were suspended due
to community protests. MMG’s Las Bambas mine had been blocked for over 500 days
since the commencement of concentrate transport in 2016. The most recent
protest began in November and forced the mine to reduce operations to 30% of
its usual capacity.
In April, after residents of the Fuerabamba community
entered the mine and set up camp inside it, the mine suspended operations for
over 50 days until June, the longest in the mine’s history. The Las Bambas mine
has halted construction of its new Chalcobamba pit, originally scheduled to
start production in 2022.
Southern Copper’s Cuajone mine was also
stopped for nearly two months until April as a result of another protest. Local
communities cut the company's water access and blocked a key railroad after the
company decided to replace a 50-year-old water pipe that supplies nearby
communities.
Glencore’s Antapaccay mine also
encountered protests from local communities. They are also opposing the Coroccohuayco
project at the Antapaccay mine. In response to the protest, Glencore said that
it does not plan to execute the US$590m Coroccohuayco project in the next two
years.
In Chile, copper producers were also
impacted by social unrest, incidents, and other operational challenges such as
facility issues, declining copper grades, Covid-related absenteeism and the
water crisis.
Chile’s state-owned Codelco, the world’s
largest copper producer, cut its 2022 copper production guidance to 1.46t –
1.435Mt, down from a previous forecast of 1.61Mt. Codelco was forced to
implement a redesign at its Ministro Hales Division after a landslide at the
end of last year, which lowered recovery levels at the site. Geomechanical
reasons and material handling system issues affected the Chuquicamata
underground mine, resulting in lower grades.
Additionally, Codelco’s flagship
El Teniente Division had less treatment due to the freezing of a reservoir,
while infrastructure conditions also led to lower recovery and treatment at the
Andina mine.
At the Chuqui Subterránea project, an expansion of Chuquicamata,
the company had a fatal accident in July, which followed the death of another
operator at the Rajo Inca project, an expansion of the Salvador mine. In early
August, the miner had a structural accident at Chuquicamata, where the top of a
material dome and a conveyor belt gave way.
Antofagasta shut down an underground
pipeline at is Los Pelambres mine after a leak was detected in late May. In
mid-September, severe sea swells overturned a construction platform working on
the marine works of the Los Pelambres desalination plant.
Antofagasta now
expects its 2022 full-year copper production at the bottom end of the revised
production guidance of 640-660kt. Approximately 30kt of expected copper
production in 2023 will be impacted due to the desalination plant delays.
Smelter and Refinery Curtailments
After an environmental incident in June
in which dozens of people showed signs of poisoning from sulphur dioxide
emissions, Codelco decided to permanently close its Ventanas smelter due to
outdated technology that made emissions reduction difficult. The Ventanas
refinery remains open.
Codelco’s Chuquicamata smelter and
refinery also experienced operational difficulties. Its operations have been
suspended for an extended overhaul. The maintenance-related stoppage was
initially planned for 90 days but has now been extended to 135 days.
In China, power rationing orders in the
June quarter impacted some smelters’ production, such as Daye (-12kt), Fuye
(-8kt), Zhangjiagang Lianhe (-4kt) and Tongling (-12kt). China’s operations
were also disrupted by Covid lockdowns. Guixi county, where the world's largest
smelter is, experienced a short-term lockdown in August, which is estimated to
reduce the Guixi smelter's output by 4kt.
New Mines and Expansions
Several new mines and expansion projects
started production during 2022. The biggest new capacity in 2022 was Ivanhoe
Mines and Zijin Mining’s Kamoa-Kakula mine in the DRC. The mine launched the
3.8Mtpa Phase Two concentrator in March, four months ahead of schedule.
Kamoa-Kakula is currently undergoing a debottlenecking programme, which will
increase the combined processing capacity of the Phase One and Two concentrator
plants from 7.6Mtpa to approximately 9.2Mtpa. Once completed in the June
quarter of 2023, the rate of copper production is projected to reach
approximately 450ktpa, positioning Kamoa-Kakula as the world’s fourth largest
copper producer.
Kamoa-Kakula will be further expanded in a third phase.
Processing capacity at Kamoa-Kakula will be lifted to greater than 14Mtpa. The
Phase Three concentrator is expected to commission in 2024 and increase copper
capacity to 600ktpa. Phase Three also includes the construction of a
direct-to-blister smelter with a production capacity of 500ktpa of blister
copper.
In Peru, Anglo American’s 60%-owned
Quellaveco open pit mine produced the first copper concentrate in July. Anglo
expects the mine to reach design capacity in 12 months and produce 300ktpa of
copper equivalent on average over its first 10 years. Quellaveco has an
estimated 1.7Bt Ore Reserves at 0.53% copper and a 36-year Reserve Life. There is
a potential for further expansion given its estimated additional Mineral
Resources at 1.6Bt at 0.38% copper.
New Smelters and Expansions
New smelters and expansions scheduled for
this year have been put into production. After several delays due to Covid-19
impacts, Daye Nonferrous’ 400ktpa Hongsheng smelter and refinery in China’s
Hubei province started commissioning in November.
The new smelter is a primary
smelting and refining project using a combination of Flash Smelting and Flash
Converting (Double-Flash) technology. It is designed to process 1.6Mtpa of
copper concentrate to produce 400ktpa of copper cathode and 1.5Mtpa of
sulphuric acid.
In Guangdong province, Jiangxi Copper
started trial production from the 100ktpa expansion project at its Qingyuan Copper
secondary smelter and refinery in November, lifting Qingyuan Copper’s total
capacity to 200ktpa. The expansion project started construction in January 2022
and was planned to be completed in twelve months at a budget of CNY253m
(US$35m).
In Qinghai province, Western Mining also
in November started production from the 50ktpa expansion project at its Qinghai
Copper smelter and refinery, lifting Qinghai Copper’s total capacity to
150ktpa.
Mergers and Acquisitions
Moving toward a net-zero emission is spurring
medium-to-long demand growth for copper. Producers have been acting in hopes of
grabbing the market share.
BHP has clearly set its strategy to grow
future facing commodities, including copper. It has made an improved offer to
acquire all shares in OZ Minerals for a cash price of A$9.6bn (US$6.4bn). The
OZ Board has noted it intends to recommend shareholders approve BHP’s new
takeover offer. BHP is likely looking at potential synergies that could be
derived from combinations of their assets in South Australia and Western
Australia.
Harmony Gold has acquired the Eva copper
project, located in the Australian state of Queensland, from Copper Mountain
Mining Corporation, with a payment of the upfront US$170m. The acquisition
marks the beginning of Harmony’s strategic diversification into copper, a
critical metal for the global energy transition.
Rio Tinto has completed its US$3.3bn
buyout of Turquoise Hill Resources. It is now the 66% owner of the Oyu Tolgoi
copper-gold mine in Mongolia, with the remaining 34% owned by the government of
Mongolia through Erdenes Oyu Tolgoi. Rio initially offered C$34 (US$25) a share
in March this year but increased it to C$43 (US$32) per share in cash in
August.
Glencore is offloading copper assets in
Australia. It sold Ernest Henry to Evolution Mining in January 2022 for A$1bn
(US729.60m). In March, Metals Acquisition Corp. entered into a definitive
agreement with Glencore to acquire the CSA mine in New South Wales for
US$1.1bn, plus a 1.5% copper net smelter royalty (NSR). In April, Comet
Resources signed a binding agreement to acquire the Mt Margaret project in
Queensland from Glencore.
AME believes Glencore’s move is not a lack of
confidence in the copper outlook. Glencore took the opportunity when copper
prices were at record highs to offload small size and short-life copper mines.
Other major M&A actions in 2022 included: Lundin Mining’s acquisition of Josemaria
Resources for a total consideration of approximately C$630m (US$490m); Sandfire Resources’ US$1,865m acquisition of the Minas de Aguas Teñidas
(MATSA) Mining Complex in Spain from Mubadala Investment Company and Trafigura; South32’s acquisition of a 45% interest in the Sierra Gorda copper mine in
Chile from Sumitomo Metal Mining and Sumitomo Corporation for a US$1.4bn
upfront cash payment, plus a contingent price-linked consideration of up to
US$500m.