The intense competition for the super conductive material among major commodity traders is creating lucrative opportunities for miners, who are now able to secure favourable terms, such as substantial upfront payments and extended contracts.
Recent expansions into the metals market by well-funded energy traders like, Mercuria Energy Group Ltd., is causing friction and sparking a race for contracts. This is happening at a time when the copper ore supply is experiencing quite the pinch.
Naturally, copper miners are capitalizing on this moment. For instance, Eurasian Resources Group (ERG) is seeking upfront payments for up to US$1B of its copper and aluminium production. This move has already attracted interest from bidders like Trafigura and Mercuria, according to insiders.
Other mining companies have also secured ore-supply contracts extending well into the latter part of this decade, with terms that are highly advantageous to them.
This competition is partly driven by energy-focused traders expanding their metals business. Mercuria has been aggressively pursuing copper deals and is in talks to hire Kostas Bintas, the former co-head of metals at Trafigura.
This trend highlights the industry’s struggle with several disruptions: while there’s an adequate supply of refined copper, there’s a significant shortage of concentrates, the semi-processed ore required by an expanding network of smelters.
Although copper demand is currently moderate, both physical and financial market players are positioning for expected deficits and rising prices in the coming years.
The copper deals being made with miners don’t generally involve price speculation, but they could still yield substantial profits for traders if the predicted copper shortages occur.
According to Bloomberg, ERG’s significant prepayment deals have also garnered strong interest from traders. ERG is offering about a year’s worth of uncommitted production from its copper assets in the Democratic Republic of Congo, along with aluminium from its Kazakh smelters.
Both Mercuria and Trafigura have engaged in discussions with ERG about these offers. ERG’s Metalkol operation and Frontier mine together produce around 200,000t of contained copper annually, while the JSC Pavlodar Aluminium Smelter can produce 250,000t of LME-branded metal per year.
Glencore already has a contract to offtake cathodes from ERG’s Metalkol facility and is increasing its prepayment under that agreement.
Other recent contracts indicate that traders anticipate the severe supply squeeze in copper concentrates to persist. Several mining companies have recently secured long-term contracts with terms previously unheard of, extending as far as 2028, according to Bloomberg.
These include Capstone Copper Corp., which has contracted to sell about 380,000t of copper concentrates from an Arizona mine, to be delivered from 2025 to 2027. Hudbay Minerals Inc. has also offered some production from Peru for delivery from 2025 until the end of 2028.
