Base Metals: An Overview of Current Developments and Future Prospects – April 13, 2023
The role of metals in the global economy
Base metals are essential for the global economy, as they are used in various industries, including construction, automotive, electronics, and renewable energy. In this article, we will provide an overview of the latest developments in the base metals market and the prospects for the future.
Copper is the most widely used base metal critical for many sectors. Canada’s Ero Copper has recently updated its five-year operating outlook and projected a 125% increase in peak copper output from mines in Brazil, reaching 100,000 to 110,000 tons in 2025. The new numbers exceed the 2025 production prediction of 92,000 to 102,000 tons. Higher grades at Tucuma and the Caraiba operations primarily drive the projected increases. Furthermore, Ero Copper plans to commission the Caraiba mill expansion to 4.2 Mt/y from 3.0 Mt/y in Q4 2023, start production at Tucuma in H2 2024, and sink a new external shaft early in 2027 to enable a two-mine system at Caraiba’s underground Pilar mine.
Despite disruptions in South America, world copper mine supply grew by 3.5% in 2022, thanks to the ramp-up of output at the world’s largest mines such as Kamoa-Kakula, Grasberg, Qulong, Batu Hijau, Aktogay, Quellaveco, and Sicomines. The ramp-up of projects is expected to support mine supply growth in 2023, with Quellaveco and Quebrada Blanca Sulphides (QB2) expected to add more than 360,000 tons compared to the 2022 output between them. However, the blockades affecting mines along the Southern Mining Corridor in Peru, the delay of critical projects in Chile, and the temporary closure of Cobre Panama have contributed to a slower growth rate, forecast to reach 2.6%.
Nickel is a key component in batteries used in electric vehicles, making it an essential metal for the green energy transition. Vladimir Potanin, the owner of Russian nickel-copper producer Norilsk Nickel (Nornickel), is deeply convinced that the company will have the strength to sell in the EU markets at previous volumes “after this period of instability has passed.” Nornickel’s European sales fell following Russia’s invasion of Ukraine in February 2022. Potanin believes that when the conflict is over, “our partners would be wise enough to treat this pragmatically and for our mutual benefit.” Potanin also said, “Everything that our traditional partners will not take, we will deliver to the markets of Southeast Asia and other countries, using logistics chains which are already in place.”
According to CRU, the Ni ore inventories at Chinese ports dropped 295,000 wmt from a week earlier to 6.11 million wmt as of March 31, 2023. The Ni ore prices trended lower due to the uncertain NPI price trend, leading to a sluggish Ni ore market. NPI plants were reluctant to purchase Ni ore due to the dropping NPI prices, while the port arrivals were low as the rainy season in the Philippines continued.
In summary, the base metals market is essential for the global economy, and the prospects for the future are promising. Despite some disruptions, copper and nickel mine supply growth is expected to continue to support the green energy transition. The global decarbonization agenda drives companies and countries to pivot their strategic focus to future-facing metals and deleverage exposure to sectors that run against it.
