The ongoing conflict between Russia and Ukraine has seen rising concerns about a copper supply shortage, as Russia is one of the world’s major copper producers and exporters.
Geographically, Russia owns
sizeable copper reserves of 61Mt of contained copper, accounting for 7% of the
world’s total reserves and ranking fourth largest in the world, behind Chile
(200Mt), Peru (87Mt) and Australia (87Mt).
Russia is also the fourth-largest
global producer of copper concentrate behind Chile, Peru, and China. It produces
approximately 5% of the world’s copper concentrate. Russia’s copper ore and
concentrate shipments totalled 577kt in the first 11 months of 2021, of which
485kt (84%) was destined for China. Kazakhstan was the second leading
destination for Russian copper ore and concentrate, with 64kt (11%), followed
by Bulgaria (22kt, 3.8%) and Uzbekistan and others (6kt, 1%).

Russia is also a major
producer and exporter of refined copper. It produces approximately 4% of the
world’s refined copper, making it the sixth-largest producer of refined copper globally.
Russia’s shipments of refined copper totalled 441kt in the first 11 months of
2021. The largest destination for Russian refined copper exports was China.
Russian refined copper exports to China amounted to 155kt (35% of the total exports)
in the first 11 months of 2021. The Netherlands was the second leading
destination of Russian refined copper with 88kt (20%), followed by Germany
(83kt, 19%) and Turkey (46kt, 10%).

Following Russia’s invasion
of Ukraine, the US, the UK, the EU and Asian nations have imposed sanctions
against the country. Major Russian banks have been denied access to the SWIFT
international payments system. An increasing number of countries have banned
Russian airlines from accessing their airspace. Other significant existing and
proposed measures include freezing assets against Russian banks, introducing
export controls on strategic goods and sanctioning some of Russia’s wealthiest
individuals, including some top officials.
These countermeasures may result
in a short-term decrease in Russia’s copper exports to European areas. Furthermore,
logistical disruptions have worsened as shipments are cancelled or rerouted,
which may further hamper exports from Russia, Kazakhstan and Uzbekistan to
Turkey and other European countries. Russia’s absence could further tighten
supply in European areas where supply is already tight. Inventories, which are
already at multi-year lows, could fall even lower. The expected declining
exports may lead to stock building up in Russia, given the country’s limited
domestic consumption. This may, in turn, force Russian producers to curtail
their production.
Looking to China, although
China is the largest destination for Russian copper, Russia only accounts for a
small portion of China’s total imports. In the first 10 months of 2021, China
imported 299kt of refined copper and 383kt of copper ore and concentrate from
Russia, accounting for 9% and 2% of its total imports, respectively. China is now
expected to import more copper from Russia.
From a global perspective, AME
expects a limited impact on the global copper supplies from the Russia-Ukraine
crisis for now, given Russia’s limited share of global supply. Our supply and
demand forecasts remain unchanged at this stage.
We currently forecast that
Russia’s copper in concentrate production will increase by 7.6% to 930kt in
2022 before increasing a further 2.0% to 949kt in 2023. Over the medium term
(2021-2025), mined production from Russia will grow at a CAGR of 4.7%, higher
than the CAGR of 3.2% expected over the long term. These growth forecasts represent
multiple large-scale greenfield projects coming online on schedule.

Udokan Copper’s Udokan mine
is the largest new project in Russia which is included in AME’s base case
supply forecast. Udokan is the largest copper deposit in Russia, with
approximately 27Mt of contained copper in Resources expected to sustain
operations until 2065. The mine is designed to extract 13.5Mtpa of ore in Stage
1, producing 65ktpa of copper in concentrate and 110ktpa of copper cathode.
The
Stage 2 expansion will potentially increase the mine’s capacity to allow it to
process 36Mtpa of ore, producing 150ktpa of copper in concentrate and 190ktpa
of copper cathode. The start of construction was announced in September 2018,
with production expected to commence in 2022.
In addition to the
contribution from the Udokan mine, major new capacity contributions are
expected in Russia from Russian Copper Company’s Tominsky GOK project and KAZ
Minerals’ Baimskaya project.
The Tominsky GOK project is
located in the Sosnovsky District of the Chelyabinsk region in Russia. Russian
Copper Company launched construction of the RUB65bn (US$1.1bn) project in July
2017. The processing plant at Tominsky consists of two lines, each with
capacity of around 14Mtpa. At full production, Tominsky will produce
approximately 105ktpa of copper in concentrate over an estimated 24-year mine
life.
KAZ Minerals acquired the
Baimskaya project, located in the Far East of Russia, for US$900m in 2019. A
bankable feasibility study completed in 2021 envisages an open-pit mine with a
mine life of 20+ years, producing an average of 300ktpa of copper and 490kozpa
of gold during the first 10 full years of operation. The processing plant will
have a total ore processing capacity of 70Mtpa from two lines. Production is
expected to start up by the end of 2027.

Russia’s refined copper
supply is forecast to rise by 12.7% to 1,107kt in 2022, followed by a 5.6%
increase in output to 1,1,69kt in 2023. Over the medium term (2021-2025),
production from Russia will grow at a CAGR of 3.3%. Over the long term
(2026-2040), the country's refined copper supply will grow at a lesser CAGR of
0.5% to reach 1,331kt.
Russia's largest producing
refined copper site is the Verkhnyaya Pyshma refinery, owned and operated by the
Ural Mining and Metallurgical Company. The refinery is expected to produce
455kt in 2022, flat from 2021, and this level is expected to be sustained over
the long term.
The other key producing site in Russia is Norilsk Nickel's Polar
Division Copper Plant, a large-scale smelting and refining operation located in
Taymyrsky. Polar Division’s production came to 300kt in 2021 and is expected to
rise to 350kt by 2023, a level which will be sustained over the long term.