Mar 23, 2021

Trafigura: green copper supercycle driving prices to $15,000

Copper
Trafigura
Daniel Brightmore
4 min
Copper
The world’s biggest copper trader expects metal to hit $15,000 a tonne in the coming decade with demand from global decarbonisation...

Even in the early stages of the covid-19 crisis, Trafigura Group was betting on the rebound that’s seen copper double over the past year to trade at more than $9,000 a tonne. Now the commodities giant sees the metal soaring past record highs above $10,000 as western economies pull out of the pandemic and the green revolution takes hold, head of copper trading Kostas Bintas said in an interview.

So far, the rally has been fueled by virus-related supply disruptions and an unprecedented buying spree in China, consumer of half of the world’s copper. But as global investment in renewable energy and electric-vehicle infrastructure surges over the next few years, Trafigura sees prices of the bellwether raw material marching even higher, reports Bloomberg.

“We thought copper would come out of this Covid crisis stronger, and that’s exactly what’s happened,” Bintas said. “What Covid has done is it has made the rest of the world a major factor in consumption growth, compared to the past, when copper was all about China.”

undefined

Trafigura expects the metal to breach $10,000 a tonne this year, before entering a range of $12,000 to $15,000 a tonne over the coming decade. Other ardent copper bulls including Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc. have similarly strong near-term forecasts, but Trafigura has set itself apart with its lofty long-term target.

Goldman expects copper to hit $10,500 a tonne within 12 months, while Citi sees it reaching $12,000 next year in its bull-case forecast. In the years to come, that’s likely to become the floor for prices as the industry revalues the metal, according to Trafigura.

“You can’t move to a green economic environment and not have the copper price moving significantly higher,” Bintas said. “How can you have one without the other?”

While China’s urbanization drive lifted prices to a record in the last major bull run, the trading house expects the rest of the world to play a larger role this time around.

“China is very much keeping up its side of the deal,” said Graeme Train, senior economist at Trafigura. “And then in the rest of the world, we really are starting to see some breakout in demand conditions now.”

Demand surge

Trafigura sold 4.4 million tonnes of copper in 2020, extending its lead over Glencore Plc as the world’s top trader of the metal. Unlike Glencore, Trafigura has steered away from buying mines - it’s even looking to sell some it operates in Spain - and its profits are chiefly derived from activities in physical copper markets.

During the pandemic, Trafigura has been polling customers across the industry, and the responses point to a rare surge in demand across Europe and the US, even before green-infrastructure stimulus packages take effect. In Europe, demand has been growing at nearly 5% year-on-year over the first quarter, in a stark turnaround from the depressed industrial growth rates seen for much of the past decade.

“All the feedback we’re getting is that they’re seeing pretty well the best quarter they’ve ever seen, ” Train said.

undefined

Trafigura’s bullish call on copper will be welcomed by investors who’ve been piling into the market over the past year, as well as mining companies that are already enjoying bonanza profits. But it will be a different story for consumers.

Already, some major copper fabricators are warning that soaring prices will prompt buyers to look for alternatives, such as aluminum in conductive wiring. High prices will also incentivize scrap dealers to ramp up collection.

Stocks depleted

Still, Trafigura believes the strain on supply will be too great to avert a price spike as the green revolution takes hold.

Covid-19 has taken a heavy toll on the supply of scrap and mined copper, leading to a sharp drawdown in global inventories over the past year. With stockpiles approaching critical levels, any further disruptions could start to have an outsized impact on prices, according to Trafigura.

“When you’re looking at a repricing of copper in a low-stock environment, what the market is saying is that only the people who really want the copper can have the copper, and they’re going to have to pay up for it,” Train said.

Away from futures markets, Trafigura also expects some profound changes in the physical industry as the market moves deeper into deficit. Processing fees charged by smelters to turn mined ore into finished metal are already at the lowest since 2010, and they could soon fall to zero, or even turn negative, Bintas said.

undefined

While that would put severe strain on smelters’ profitability, the tight supply of refined copper will spur a rally in shipping premiums paid by customers. Byproduct prices are also likely to rise, helping to partially offset the impact, he said.

The looming green revolution has bolstered the outlook for many industrial metals, prompting some analysts to call the start of a new supercycle in commodities markets. But Trafigura says copper’s tight supply dynamics set it apart from the pack, and underpin the trading house’s bold call on prices.

“I’m not sure about the commodities supercycle, but I’m 100% sure about the copper supercycle,” Bintas said.

Share article

Apr 19, 2021

AngloGold Ashanti establishes BG Umoja JV in Tanzania

AngloGoldAshanti
Geita
Gold
Sustainability
Daniel Brightmore
3 min
AngloGold Ashanti, Geita, Tanzania, BG Umoja
AngloGold Ashanti’s BG Umoja JV has been awarded a $186mn two-year contract for the Nyankanga and Geita Hill underground mining projects in Tanzania...

AngloGold Ashanti, in line with it s strategy to ensure a sustainable contribution to the economies of host countries, has established the BG Umoja joint venture (JV), in Tanzania.

Awarded a $186m two-year mining contract for the Nyankanga and Geita Hill underground mining projects, the 80/20 joint venture is a partnership between Africa Underground Mining Services (AUMS) Tanzania, a subsidiary of Australia’s Perenti Group, and local drilling services and mining- supply company, Geofields Tanzania Limited. 

The partnership is modelled on a similar underground mining joint venture at the Company’s Obuasi Redevelopment Project in Ghana between AUMS Ghana and Accra-based, wholly Ghanaian-owned Rocksure and will help build local specialised mining capacity.

AngloGold Ashanti

“We’re working with our experienced mining contractors to assist in establishing local joint ventures for long-term transfer of sustainable skills, and to continue building on our sustainable local procurement programmes,” commented Sicelo Ntuli, AngloGold Ashanti’s Chief Operating Officer: Africa. 

“AngloGold Ashanti is building sustainable local procurement programmes that will allow it to stimulate economic and social development at all of its operations, evidenced by the significant contribution Geita has made to the fiscus and people of Tanzania.”

AngloGold Ashanti’s annual expenditure with indigenous Tanzanian suppliers has almost tripled to $162mn since 2016. The company’s local team in Tanzania has set itself an ambitious target of 60% to 70% of all expenditures with indigenous Tanzanian companies, by 2025.

Scope 3 Emissions

In addition, AngloGold Ashanti’s Geita Gold Mine has awarded a two-year fuel transportation contract, worth approximately $10.8m a year, to two local contractors - one of which is originally from Geita. This is in line with the mine’s commitment to contribute to the economies of host communities. The Geita-based company was part of Geita Mine’s supply chain capacity building initiative for host community suppliers, a partnership between the Mine and the National Economic Empowerment Council.

To influence Scope 3 emissions, trucks are to be compliant with EURO IV emissions standards, tankers are to be made of an aluminium alloy material to reduce weight and the age of the fleet will be maintained at less than six years.

Diversity & Inclusion

The contractors already employ women fuel tanker drivers, fulfilling the Mine’s requirements for diversity and inclusion. The two contractors both own workshop facilities in Geita town and participate in social initiatives aimed at uplifting the lives of host community residents.

AngloGold Ashanti has been operating at Geita Gold Mine for more than 20 years, with the project initially a single pit mine, evolving now to a predominantly underground operation, employing 5,700 employees and contractors.

Earlier this year, the Government of Tanzania recognized AngloGold Ashanti’s contribution to the economy of the country, awarding it for its outstanding performance in a number of areas, including environmental and safety performance, corporate social investment, the best taxpayer in the mining sector, the runners up in local business content and overall best performer in the mining sector in Tanzania in 2019/2020.

Geita Gold Mine

Geita, one of AngloGold Ashanti’s flagship mines, is located in north-western Tanzania in the Lake Victoria goldfields of Mwanza region, about 120km from Mwanza and 4km west of the town of Geita. It has been in operation as a large-scale mine since 2000.

Share article

You might also like these articles

Copper
Daniel Brightmore
Supply Chain & Operations
Copper, Renewable Energy
Daniel Brightmore
Supply Chain & Operations