The value of copper in the different stages of the value chain of copper is explained. It is clarified how the value of the copper content in ores and concentrates, in cathodes, in recycling materials and in copper products is calculated and how it is used in the sales or purchase of copper containing materials. It is shown that the registered copper cathode is the base for all commercial negotiations – not only for cathodes. The role of the London Metal Exchang (LME) and hedging is also discussed.

1. Understanding
Copper
The Value Chain of Copper –
from Mining to Application
Bernd E. Langner
Webinar, European Copper Institute , 4th December 2014

2. Understanding
Copper
As an association, the European Copper Institute is
unable to provide information regarding future supply/
demand and price forecasts
Price and cost data contained in this presentation are
the views of the author, are historical and for illustrative
purposes only
Webinar, ECI, Value Chain of Copper, 4th Dec. 2014

3. Understanding
Copper
Mining
Smelting and Refining
Scrap Processing
Solventextraction/Electrowin
ning (SX/EW)
Ore/Concentrate Cathodes
First Use: Wire Rod, Shapes
Semis: Strip, Wire, Tubes, Bars, Profiles
Processes
Values
The Way from Mining to Application
19 % (3.8 Mio. t)
64% (12.8 Mio. t)
17 % (3.5 Mio. t)
Webinar, European Copper Institute , 4th December 2014

4. Understanding
Copper
The Copper Industry is Highly Fragmented
Copper:
Mining Companies
Smelters and Refiners
Wire Rod/Shape Producers
Semis/Cable Producers
Aluminium:
Aluminium Producers
Steel:
Steel Producers
Mining Companies
Webinar, European Copper Institute , 4th December 2014

5. Understanding
Copper
Fragmentation of the Value Chain:
The Reasons ...
The Reasons:
Copper: The final Product of Refining is the Cathode:
• It is solid
• It can be traded
• It can be stored
• It can be transported
• It has to be melted before casting
Aluminium: The final Product of Refining is a Liquid:
• It is liquid
• It cannot be traded
• It cannot be stored over a long time
• It cannot be transported over long distances
• It can be casted directly to billets, bars, and shapes
Copper: Historical Reasons
• Before electrical applications copper products were produced by a
lot of small family owned companies, which partly still exist
• Electrolytical Refining is a total different process than casting or
pyrometallurgical refining
Webinar, European Copper Institute , 4th December 2014

6. Understanding
Copper
Fragmentation of the Value Chain:
... and the Consequences
The Consequences:
• Copper is the most traded Metal in the World
• Hedging plays an important role between all parts of the
Value Chain
• Copper Price is volatile but the risk can be hedged effectively
• Copper is sometimes a victim of speculation
• Transportation Costs are important
• Consolidation is discussed since more than 20 years, but has
happened only within the mining industry
Webinar, European Copper Institute , 4th December 2014

7. Understanding
Copper
The Value Chain of Copper:
Where to start?
Ore
Concentrate
Anodes
Cathodes
Wire Rod/Shapes
Semis
The Base of all Calculations
in the whole Value Chain of Copper is the
LME Registered Cathode:
• Costs
• Revenues
• Prices
Webinar, European Copper Institute , 4th December 2014

8. Understanding
Copper
The LME Registered Cathode
Trading at the
London Metal Exchange
Requirements for Registration:
• Limits of impurities, e.g. Bi<2 ppm, Antimony <4ppm, Te < 2ppm
• Must have been in the market since at least one year
• Production at least 15,000 tons/year
• Practical Test: Wire Rod Production with 3 Manufacturers with 200 tons each
Drawability, Recrystallization, Conductivity
• Final Decision by the Executive Committee of the LME
Similar Rules for COMEX and Shanghai Future Exchange
There are about 80 registered brands
Webinar, European Copper Institute , 4th December 2014

9. Understanding
Copper
The Cathode
– Base for all Copper Containing Materials
Raw Material
• Scrap
• Concentrate
• Residues
Value:
+ LME for Copper Content
– Processing Charges
– Penalties for impurities
+ Value of other metals
- Losses
Products
• First Use: Wire
Rod, Shapes
• Strip, Tubes, Bars
• Wire
Value:
+ LME für Copper Content
+ Surcharges
+ Premiums (Financing,
Purchasing etc.)
+ Value of Alloying Metals
The Copper Content of a Material
can be hedged at the LME
by buying and selling cathodes:
Contracts can be made for future deliveries for at least 25 t
Webinar, European Copper Institute , 4th December 2014

10. Understanding
Copper
The First Part of the Value Chain:
Primary Production: Mining of Sulfidic Ores
The First Products with a Value are Copper Concentrates
with 20-35 % Copper Content
Webinar, European Copper Institute , 4th December 2014

11. Understanding
Copper
The First Part of the Value Chain:
Value of Concentrates
Value for Mining Companies with own Smelting
and Refining Plants:
+ LME Price for Copper Content
+ Cathode Premium
- Costs for Smelting and Refining
(+ Sales of By Products)
Value for Mining Companies without own
Smelting and Refining Plants:
+ LME Price for Copper Content
- Treatment and Refining Charges (TC/RCs)
- Penalties for Impurities
- Losses to be paid
+ Paid Value of other Metals
Webinar, European Copper Institute , 4th December 2014

12. Understanding
Copper
The First Part of the Value Chain:
Calculating Costs in the Mining Industry
Cost Items 2008
(US – ct/lb Copper Content)
Codelco
Total Costs and Expenses 178.0
Treatment and Refining Charges
(TC/RCs)
3.8
By Products Credit (e.g. Gold,
Molybdenum)
- 62.2
Net Cathode Costs C3 119.6
Depreciation and Amortization - 29.8
Non operational costs and provisions - 15.6
Direct Costs C1 70.2
C1 Costs can be negative in some cases,
because By Products Credit included in Costs !!
Webinar, European Copper Institute , 4th December 2014

13. Understanding
Copper
The First Part of the Value Chain: Oxidic Ores
Solventextraction/Electrowinning (SX/EW)
Value for SX/EW:
+ LME Price for Cathodes
+ Cathode Premium
No Valuable By Products!
Technology invented in 1960ies
Now about 19 % of Cathode Production
- No Flotation possible for Oxidic Ores
- Oxidic Ores have got a Value
- Production normally cheaper
than for sulfidic ores
Webinar, European Copper Institute , 4th December 2014

14. Understanding
Copper
The Second Part of the Value Chain:
The Smelting and Refining Process
1000 kg of Concentrate leads to:
250-350 kg Copper Cathodes
1000 kg Sulfuric Acid
500-700 kg Iron Silicate Stone or Slag
2-3 kg Anode Slime
Webinar, European Copper Institute , 4th December 2014

15. Understanding
Copper
The Second Part of the Value Chain:
TC/RCs and Premium in Smelting and Refining
Assumptions Treatment Charge (TC):
60 USD/ton of concentrate
Refining Charge (RC):
6 ct/lb Copper
Copper Content: 30 %
Treatment Charge
(USD/ton Concentrate)
60 USD/ton
Refining Charge
(USD/ton Copper)
0.06*1000/0.454*0.30
= 39.64 USD/ton
Sum: 99.64 USD/ton of concentrate or
15 ct/lb of Copper
Cathode Premium 50-150 USD/ton of Copper
Historical Range of TC/RCs 30/30 up to 130/130
Depending on Concentrate Production and Smelter Capacities
Webinar, European Copper Institute , 4th December 2014

16. Understanding
Copper
The Second Part of the Value Chain:
Other Influences for a Smelter and Refiner
Price for Sulfuric Acid historical 10-100 USD/ton
Often less than Costs for Production of
Sulfuric Acid
Metal Gains in
Comparison with Agreed
Losses in the Contract
May be Negative or Positive
Depending on the Process Optimization
and the Composition of the Concentrate
Iron Silicate Stone/Slag Sales: Zero or Disposal Costs
Other By Products e.g. Arsenic: Waste Disposal
Gas Cleaning and
Sulfuric Acid Plant
Webinar, European Copper Institute , 4th December 2014

17. Understanding
Copper
The Second Part of the Value Chain:
Comparison between Smelters by Cost Curves
How to read - an Example: 80% of the whole Smelter Capacities
have Production Costs less 78 ct/lb
Webinar, European Copper Institute , 4th December 2014

18. Understanding
Copper
The Second Part of the Value Chain:
Yield of Copper in Primary Production
Webinar, European Copper Institute , 4th December 2014

19. Understanding
Copper
A Side-Step in the Value Chain:
Recycling of Copper/Secondary Production
Scrap can be classified in a different way:
• By copper content, e.g. >90%
• By the processing route like refinery scrap, direct melt, brass mill scrap
• By the physical appearance like bare wires, heavy scrap and light scrap
• By the sources of scrap like turnings, electronic scrap, old radiators
3 big groups of scrap
• Production Scrap (New Scrap)
• Old Scrap
• Complex „Scrap“ like
• Electronic Scrap, Residues etc.
Webinar, European Copper Institute , 4th December 2014

20. Understanding
Copper
A Side-Step in the Value Chain:
Recycling of Copper – What is the Value?
What is the Copper Content?
• Estimation (if >90% Copper)
• Sampling
• Homogenization by Melting a
Sample (Drilling or Sawing,
using the Turnings)
Pricing
• Copper Content minus Losses priced by LME „the
lowest of the Four“: Settlement Buyers and Sellers, 3
Month Buyers and Sellers
• Minus Price for Processing and Refining (if Refining
Scrap)
Webinar, European Copper Institute , 4th December 2014

21. Other Materials
• Electronic Scrap: Sampling, Precious Metals
• Residues: Sometimes without payment
Old Scrap
Normally Copper Content > 90 %
• Electrorefined for Cathode Production
• Evaluation by Estimation
• Volatile Processing Charges historical 100-1000 €/ton
Production Scrap (New Scrap)
Normally Copper Content > 99.5 %
(or pure Alloy like Brass)
• Direct Melted for Products without refining
(e.g. for roofing copper, plumbing tubes)
• Often not in the Statistics for Copper Usage
Understanding
Copper
A Side-Step in the Value Chain:
Recycling of Copper
Webinar, European Copper Institute , 4th December 2014

22. Understanding
Copper
The Third Part of the Value Chain:
Copper Products: Wire & Cable
Wires, CablesWire RodCathodes
Smelters and Refiners Smelters and Refiners
(Integrated)
Wire Rod Producers
(Buying Cathodes)
Standardized: 8 mm,ETP Copper
Capacity of one Plant:
100.000- 300.000 t/a
Surcharge: historical <300 €/t
Cable Companies
(Enameled ) Wire Producers
High Variety in Products
Usage of one Plant:
1.000 -15.000 t/a
Price:estimated
>1000 €/t + LME Copper
Wire Rod accounts for more than 60 % of the Cathode Usage
Webinar, European Copper Institute , 4th December 2014

23. Understanding
Copper
The Third Part of the Value Chain:
Copper Products: Strips, Tubes, Bars,
Shapes
Cathodes (Smelters and Refiners)
New Scrap (Semis Customers, Dealers) Semis:
Strip, Tubes, Profiles, Bars
Semis Producers
High Variety of Products,
No Standardization
More than 200 different Alloys
50 % Scrap during Processing
Surcharge(Mainly):Hist. 500-1000 USD/ton
Specialties: Hist. >1000 USD/ton
Delivery Times: 3-8 Weeks
Semis have only 30 % of the
Copper Market but a huge variety
In Geometries, Alloys and Qualities
Webinar, European Copper Institute , 4th December 2014

24. Understanding
Copper
The Third Part of the Value Chain:
Copper Products: Pricing and Costs
Pricing:
LME Copper Price + Premium + Surcharge
Or
Copper Price Including Financing and Purchasing Costs1) +Surcharge
1)Different Quotations of Companies in different Countries like:
Germany: DEL-Quotation, MK-Ouotation
Italy:Milano-Quotation
United Kingdom: CRMV
Often based on 100 kg
Pricing has to Cover:
Operational Costs + Financing Costs + Costs for Scrap
Financing Costs are big especially for Semis:
Processing time (strip): 3-8 weeks
Stocks because of a big variety of products for a huge number of
applications
Payment Terms have to finance also the metal value
Processing Scrap rate of about 30-60 %
Webinar, European Copper Institute , 4th December 2014

25. Understanding
Copper
The Third Part of the Value Chain:
Processing Scrap Rates are high
Webinar, European Copper Institute , 4th December 2014

26. Understanding
Copper
The Third Part of the Value Chain:
Financing Costs are High for Semis
Webinar, European Copper Institute , 4th December 2014

27. Understanding
Copper
Historical Revenues in the whole
Value Chain of Copper
Webinar, European Copper Institute , 4th December 2014

28. What is the future?
There are Challenges ....
0
1
2
3
4
5
6
2002200320042005200620072008200920102011201220132014
Ratio Copper Price/Aluminium Price
Substitution by Aluminium for Conductors
Substitution by Zinc, Plastics, Steel
in Roofing and Plumbing
But you have to compare the System
- not only the Conductor
Understanding
Copper
Webinar, European Copper Institute , 4th December 2014

29. What is the future?
but many more Chances ....
Understanding
Copper
6605
9983
5000
6000
7000
8000
9000
10000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Production „Worldwide“: Europe, Japan, US, China (1000ts)
Copper is the Metal of the Sustainable Development:
Recycling is nearly 100 %
Copper saves Energy
Copper is needed in the Generation, Transformation and Transportation of renewable energy
Wire Rod Production has increased by 50 % in the last 12 years –
Inspite of the price increase
Webinar, European Copper Institute , 4th December 2014

30. Understanding
Copper
You want more Details ?
The whole Value Chain of Copper
on 375 Pages in my Book or
in special Workshops:
Understanding Copper – Technologies, Markets, Business
www.understanding-copper.com
Write to
langner@understanding-copper.com
Thank you for Your Attention
Any Questions?
Webinar, European Copper Institute , 4th December 2014

31. Understanding
Copper