Why pay a broker mark up? Deal direct for cast bronze parts or bars made to your exact specifications for any application. Veteran owned. Competitive prices and delivery.
Sign up here for GlobalData’s free bi-weekly Covid-19 report on the latest information your industry needs to know.
Copper – known for a plethora of uses owing to its conductivity, strength, and ease of fabrication – is seeing its highest price since 2010. The metal has surged around 38% from March lows, owing to optimism over an unanticipatedly quick demand rebound in China, combined with rising supply concerns in South America due to the effects of Covid-19 on top miners in Chile, Peru, and other nations on the continent.
As the wider economic effects of the Covid-19 pandemic become more comprehensible, what lies ahead for copper miners in the post-coronavirus economy?
Copper supply concerns escalate
Chilean state-owned Codelco, one of the world’s largest copper miners, has struggled with the effects of Covid-19 on its operations, with a recent tally showing that almost 2,000 of its 71,000-strong workforce had tested positive for the virus. Codelco has introduced measures aimed at curbing the spread of the disease at its operations, halting construction projects in northern Chile until activities can resume safely, and moving to 14-days-on, 14-days-off rosters at a number of its mines in Chile.
Codelco has had a number of clashes with Chilean mining unions over its safety protocols amid the pandemic, with unionised workers at Codelco operations threatening a walkout following an “alarming” spike in cases at some of its mines. The copper miner has struggled with the balancing act of reducing worker infections while continuing to produce enough copper to finance state spending. Head of the Chuquicamata 2 union Liliana Ugarte told Reuters: “The lives of our people are more important than any production targets.”
Chile accounts for more than a third of global copper output, so any disruptions to supply will be felt globally.
GlobalData senior mining analyst David Kurtz agrees with the IWCC expectation of a surplus: “We are expecting a drop in production of around 2%, due to the impact of Covid-19 on operations, particularly in Chile where there have been a large number of cases at major mines, such as El Teniente and Chuquicamata.”
Demand collapsed as Covid-19 hit
As the effects of the Covid-19 pandemic upended the global economy at the start of 2020, virtually every industry was thrown into disarray. Building and construction accounts for 36% of copper used, but demand in this sector dropped significantly as national lockdowns and other safety measures put construction works on pause.
“Prior to the pandemic, we expected an acceleration in the global construction sector, but now this forecast has been revised down to a growth rate of only 0.5%,” mining consultancy Core Consultants managing director Lara Smith explains.
“But this growth assumes that the outbreak is contained across all major markets by the second half of the year. But now there is talk about a second wave, so this is the question; if there truly is a second wave and countries, especially China, retreat into lockdown again, then we can expect this sector to exhibit a year-on-year decline.”
China’s construction sector – indeed, it’s wider economy – has bounced back from its initial struggle against the virus faster than most analysts had anticipated.
Kurtz explains: “China’s construction industry has started showing signs of recovery. Investment activities started picking up in March, before accelerating in April, with the latest data showing investments in real estate development up 7% year-on-year in April, which followed marginal growth of 1.1% in March and a 16.3% contraction during the first two months.”
There is concern over a second wave of infections and how this could affect the demand outlook should countries need to tighten measures. As lockdowns lift and some semblance of normalcy returns to daily life, eyes have been on the world’s major economies to see whether the virus sees a resurgence. With the US recording a surge in infections, the UK implementing localised lockdowns, and China reimplementing lockdown measures when areas see infection spikes, there are fears over what a new global outbreak could mean for the economy both long-term and short-term.
Sustainability, recyclability, and endless uses should pave the road ahead
“The coronavirus pandemic has created a rather complex but mixed picture for the copper industry; in some ways we have fared better than a lot of other sectors, but we haven’t been immune either,” Mark Millerchip, managing director of copper tube manufacturer Mueller Europe said. “Copper has a lot of down-stream uses that span across a variety of sectors and industries so there will inevitably be winners and losers as we emerge from this crisis.”
Millerchip explains that the outlook for copper varies across sectors: “Tech industries that use copper in computers will likely thrive as the dynamic of working from home is likely to change forever. On the flip side you have the automotive industry, which has seen some of the lowest levels of new car sales in decades because people are staying home.”
In the UK, where construction work has halted and impacted demand for copper, other sectors have found new need for the metal. Millerchip says: “As much as we have seen a short-term change in construction, we have also seen an increased demand for medical copper tube. The construction of the Nightingale hospitals resulted in a tenfold increase in the demand for medical copper because of its unique anti-microbial properties and it being the key material used to connect ventilators.”
Nightingale hospitals are the emergency medical facilities that the UK government commissioned as part of its initial Covid-19 preparations, makeshift hospital facilities to create more space for a spike in hospital patients. Nightingale hospitals were stocked with ventilators and other key equipment used in caring for Covid-19 patients.
In addition to its use for this medical equipment, copper has received attention for its potential use in sanitising workplaces – in May 2020, Chile’s mining minister Baldo Prokurica ordered that the building housing his office be disinfected using quaternary ammonium enhanced with copper particles, to avoid Covid-19 spreading through the building. Masks coated with the same substance were presented at the PDAC conference in Toronto in early 2020.
Lawton Tubes managing director Oliver Lawton agrees with Millerchip: “Health and the environment will be major factors as we emerge from Covid-19 and the fact that copper tube is 100% infinitely recyclable makes it a great choice for the future.”
As part of post-pandemic economic recovery plans, a number of countries have set out strategies to accelerate construction and infrastructure projects aimed at stimulating the economy. This is true in China, with the transport ministry announcing a pool of transportation projects worth CNY800bn ($113bn). In the UK, the government announced plans to kickstart the economy by fast-tracking construction projects.
Lawton added: “Despite there being challenges in the short-term, I believe we are in a unique position to look towards a future where sustainability is going to play a big part in a lot of industries and copper will help make that possible.”
Over 100 Years Experience – Manufacturers of Bronze Bearings, Bushings, and Continuous Cast Bars Since 1913