LONDON Competition for copper products in the European
market may intensify next year amid static demand and
overcapacity, Aurubis AG executive board member Stefan Boel
told AMM sister publication Metal Bulletin.
Product demand has declined over the past year, and Aurubis
expects orders to stabilize at these lower levels moving into
What we see is that it might be that the cake has shrunk
a bit in the past year, and it might be a similar size next
year. But given the overcapacity which is there, everybody is
competing for volumes, and that might intensify, Boel
told Metal Bulletin.
Hamburg, Germany-based Aurubis made strides into high-volume
copper products markets with the acquisition of London-based
Luvata UK Ltd.s flat-rolled products business in 2011 for
200 million to 220 million ($285.4 million to $314
million), complementing its activities in smaller,
higher-margin markets such as high-performance alloys and strip
The companys competitiveness in flat-rolled product
markets depends on its ability to secure strong sales volumes,
and this in turn requires robust risk management, Boel said.
We need our volumesthats for sure, he
said, adding that product sales have to be fully insured and
hedged against credit and price risk.
Copper is so expensive that we cant run the risk of
having fully open exposure, and so everything we sell has to be
insured, he said. It might be that some other
companies dont do that, and with Europe in crisis, with
lower prices and lower margins it can be difficult to cover the
cost of insurance as well. But for us, its fairly simple:
What we sell needs to be secured.
We have one very simple policy (on price): The biggest
exposure we run on price is half a lot, he added.
The company also runs a lean process and product inventory to
minimize price risk and working capital intensity, Boel said.
Were not going to run a bigger stock, because we
cant afford it at 6,000 per tonne ($9,628.51 per
tonne). It has to be lean, lean, lean, he said.
The company can nevertheless collect strong premiums on stock
it can make available to the thinly supplied European market,
Last month, Aurubis said it is able to achieve premiums of up
to $100 per tonne on some spot sales, above the $86-per-tonne
level it has offered on contracts for next year.
Metal Bulletin weighted average copper premiums were $86.43 per
tonne in warehouse Rotterdam on Dec. 5.
Our customers are having a particularly hard time
forecasting what theyre going to need for next year,
because visibility on their sales is very low. We get orders a
couple of days in advance nowadays, he said.
While customers have a restricted view on forward orders,
demand for contract volumes in Europe is broadly level with
2012 bookings, Boel said.
We are still working on our cathode contracts, but I
havent heard that there will be more or less spot. We are
mainly dealing with the biggest cathode consumers now, and what
they have said theyll need is fairly in line with our
estimates, he told Metal Bulletin.
Whatever we cant supply in Europe, were
selling in China, for instance. In China, we had very good,
very professional performance on contracts this year. In terms
of volumes (for 2013), its not that bad, but maybe it
will need a bit more time to sign contracts, he said.
We are becoming more and more established in China,
A version of this article was first published by AMM sister
publication Metal Bulletin.