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Copper: An introduction

Sep 25, 2008

Copper is a non-magnetic reddish coloured metal with high electrical and thermal conductivity among pure metals only after silver. It also has tensile strength and resistance to corrosion. Copper is consumed mainly in the form of three products group viz-copper wire rods, alloy products and other copper products. Copper rods accounted almost 50% of total copper production in 2007, followed by copper alloys and other copper products.

Industry structure: The copper industry is broadly divided into three types of producers,

  1. Miners who mine the copper ore and produce copper concentrate
  2. Custom smelters who refine the copper concentrate and produce the metal and
  3. Integrated players who mine the copper ore from their captive mines and produce the metal through smelting and refining.

Mines are the principal source of copper production globally while scrap recycling accounts only a minor portion of the total supply. Nearly two third of worlds global mine production is integrated while rest is sold in the custom smelting markets. The five largest copper mining countries are Chile, US, Peru, Australia and Indonesia, while the major custom smelting locations include China, Chile, Japan, Russia and Germany.

Pricing structure: Prices of copper are determined at the London Metal Exchange (LME). However, producers normally charge a regional premium, which is market driven. Custom smelters profitability is determined by the TcRc (Treatment/ Refining charges) rates, as the prices of copper concentrate are equal to LME prices net of TcRc charges. Prices of finished copper products are equal to LME plus premium. The TcRc rates are influenced by the demand and supply of copper concentrate in the market, current and forecasted LME prices, mining rates and freight costs.

User industry: Copper has wide use across most of the industries. Its main user industries are construction, electric and electronic products, industrial machinery and equipment and consumer & general products.

As per Brook Hunt, the UK based global mining and metal industry consulting firm, copper does not posses any major substitution threats between 2008 and 2020. Moreover it not only expects copper to retain its position in existing applications but also regain some of the market share, which it had lost to aluminium.

In next article we would discuss about the development of copper industry in India and its current scenario.

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