ab8 February 2024Global Research and Evidence LabCommoditiesCopper 101Copper 101Often referred to as "Dr Copper" due to its role as an indicator for global economic health, copper and its alloys possess a variety of properties that make them some of the most versatile materials available. It is a highly ductile semi-precious metal with high thermal & electrical conductivity and excellent corrosion resistance; it is used extensively in construction & appliances. Copper is predominantly extracted from sulphide ore which is typically concentrated, smelted, and then refined to produce cathode, but also from oxide ore (normally found near the surface) which is typically leached with the copper recovered through a solvent extraction & electrowinning (SX-EW) process.Suppliers and consumersSupply: global refined copper production in 2023 was ~26mt consisting of ~22.5mt mine production and ~3.5mt of secondary supply. Mine production is the structural constraint to copper production (rather than smelting/refining). Copper mining is relatively fragmented with >400 operational copper mines; the top 10 miners account for ~40% of the total market. The top copper miners are Chile (24%), Peru (12%), the DRC (11%), China (9%) and the US (6%). The largest copper companies (equity basis) globally in 2023 include Codelco, BHP and Freeport (all ~6%). Consistent with other metals, China dominates copper smelting & refining, the key trade flow being copper concentrate exported from Latam (Chile & Peru) that is smelted/refined in China. Other key refined producers include Chile (smelters & SXEW), DRC (SXEW), Japan (smelters) and Russia (smelters). Looking forward we expect sustained growth in China smelter capacity but also new smelters are also being built in DRC, Indonesia & India. Demand: China is the largest consumer of copper at ~50% of total demand, followed by Europe (16%) & North America (10%). Key end use sectors include electrical networks (~25%), construction (~25%), consumer goods (AC's/heat exchangers), machinery and automotive. Whilst copper has a broad range of end use applications that are geared to global industrial production/GDP, future secular growth drivers that are exposed to energy transition include renewable power generation, automotive electrification (EVs) and a increase in electrical network infrastructure to support the energy transition. Over the past ~30 years, copper demand has grown by ~2.5%pa. Figure 1: Copper cathode at Glencore's CCR refinerySource: UBSThis report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 25. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the ob...
