Long-term demand for copper, steel and zinc may be underestimated by the market

SUZHOU, Dec 4 (SMM) – The long-term metals demand, specifically copper may be greatly underestimated by the market, said Javier Targhetta, Senior Vice President Marketing & Sales of Freeport-McMoRan and President, Atlantic Copper.

Targhetta was speaking to local and international delegates at the Shanghai Metals Market’s 2020 Nonferrous Metals Industry Chain Annual Conference held in Kempinski Hotel at Suzhou, China.

Freeport is one of the largest producers of copper in the world. In 2019, 79% of its revenues were from the sale of copper, and 11% were from the sale of gold, and 8% were from the sale of molybdenum.

In his keynote address entitled “Base Metals: A Cornerstone for Today´s and Tomorrow´s Global Changes”, Targhetta shared his views about the long-term demand for nonferrous and ferrous metals.

“Zinc consumption growth rates in China and other regions are expected to extend beyond historical norms due to the emergence of new end-use such as the use of zinc as a micro-nutrient in agricultural fertilizers,“ Targhetta said.

Zinc continued to post strong gains, reflecting the steady growth in China whilst the rest of the world is struggling from recovery from the COVID-19 pandemic led economic slump. Expectations of a surge in government’s construction and infrastructure spending in China have boosted the demand outlook for zinc (used in galvanizing steel) and steel.

Similarly, as steel is considered an early use metal, particularly in construction and infrastructure, Targhetta thinks that “strong initial growth rates are gradually replaced by stable-to-negative growth over time as an economy matures.”

Zinc Slab Consumption by Region

Source: Freeport

Finished Steel Consumption by Region

Source: Freeport/ Atlantic Copper

Will copper supply catch up with demand?

For other industrial metals, Targhetta sees a strong continued growth in copper consumption in the long-term.  “The continued growth in copper consumption due to its use in traditional sectors such as construction, energy transition and EVs to establish new demand growth opportunities.”

For aluminium, Targhetta thinks that growth in aluminum consumption tends to be more prevalent in the middle stages of a country´s development. “China´s declining aluminum consumption starting in the late 2020s due to lower future growth rates in construction.”

Speaking specifically about the copper sector, Targhetta said that there are 3 key trends to transform the copper market: urbanization & household electrification, energy transition and electric vehicle.

“Copper production expected to decline by 2.1% this year, which is the disruption rate above average level. Several projects under construction were delayed due to Covid-19, but development has resumed. Base case copper production is likely to decline on depleting reserves and declining grades,” he said.

On the supply-side, Covid-19, the Chilean labour relations, Peruvian social unrest, as well as resource nationalism in Africa and Asia remain as the key factors to look out for, while long-term requirements for mine supply remain. This include projects under development to meet future copper demand.

Refined Copper Consumption by Region

Source: Freeport/ Atlantic Copper

As for recycled metals, Targhetta sees the growth potential of scrap metals, as recycling is a key part of a de-carbonized world as it uses less energy than primary production and reduces carbon dioxide emissions

“Arising with urbanization growth and the move to a low-carbon economy, scrap is a vital component of metals supply. Copper scrap accounted for over 31% of total copper consumption in 2019; however, its contribution has been as high as 40% at certain points in the cycle.”

On the lithium Market Outlook, Targhetta expects by 2040, lithium demand from EVs is expected to be three times the entire lithium market in 2019.” EVs are the largest and fastest growing sector for lithium demand, which grew by more than 9% YoY in 2019, with nearly 95% attributable to the battery sector.”