SINGAPORE- As Indonesia prepares to ramp up domestic copper smelting, processors elsewhere must look for alternative sources of concentrate, which might cost more, consultancy firm CRU group said on Tuesday.
Indonesia is one of the world’s top exporters of copper concentrate, or partially processed copper ore, with shipments estimated by CRU at some 1.3 million tons in 2020.
In a bid to boost domestic processing and add value to exports, it said last year it would ban copper concentrate exports from 2023 onwards, and would grant export permits to those building a certain level of smelting capacity.
The country, which currently operates only one domestic copper smelter, is building two more and planning other projects to develop its mineral processing sector and take advantage of its vast reserves of ore.
“Between now and when Indonesia’s new copper smelters commence production, smelters that have been reliant on material from Indonesian mines will need to find alternative concentrate sources,” said CRU analyst Craig Lang at the CRU Jakarta Virtual Seminar.
Smelters in Japan, South Korea, the Philippines and coastal locations in China may need to replace the Indonesian concentrate with material from other suppliers, Lang said.
That would take longer to ship and benefit less given the likely lower gold content compared with Indonesian material, he added.
The copper market is already expected to face a shortage from the middle of this decade, analysts have said, as demand from the global push for sustainability ramps up, with applications such as electric vehicles expected to require large quantities of the metal.
Indonesia’s sole existing smelter PT Smelting is located in Gresik, East Java. Two more, New Gresik and Sumbawa, are under construction, Lang said, and another will likely be needed by the early 2030s if mine projects currently being developed are delivered.
Indonesia in April signed a Memorandum of Understanding with China ENFI Engineering Corporation to build a copper smelter with 400,000 tons of cathode capacity a year.
Copper prices rose on Wednesday, supported by supply worries and promising demand outlook, but high factory gate prices in China raised concerns of price curbs by the government.
Three-month copper on the London Metal Exchange edged up 0.1 percent to $9,972.50 a ton while the most-traded July copper contract on the Shanghai Futures Exchange rose 0.6 percent to 71,840 yuan ($11,234.48) a ton.
“Demand is still good over there (in China), but the extra demand that would push spot premiums higher and cause the arbitrage to open is not there,” said Anna Stablum, a commodities broker at Marex Spectron.
“But few dare to go short on the long-term supply issues and great demand expectations from “green economy”… thus, prices will be stuck around here for a bit longer.”
Socialist Pedro Castillo, who had pledged a tax overhaul on mining in Peru, was in the lead on Tuesday in the country’s presidential elections, while a proposed royalty bill and labor strikes at some of BHP Group’s mines could hinder Chilean supply. – Reuters
