Miners Secure Favorable Terms Amid Copper Supply Crunch

Intense competition among some of the largest commodity traders for copper has opened up opportunities for miners to secure favorable terms, including large upfront payments and long-term contracts. Recent moves by cash-rich energy traders like Mercuria Energy Group to expand their metals business have heightened tensions and sparked a scramble for contracts in an industry already facing a severe copper ore supply crunch. The metals market, long dominated by Glencore and Trafigura, is now seeing new players vying for a piece of the action.

Mining companies are capitalizing on this competition. Eurasian Resources Group (ERG) is seeking up to $1 billion in upfront payments for its copper and aluminum production, attracting interest from Trafigura and Mercuria. Other companies have also signed contracts extending to 2028 under terms highly favorable to miners.

This competition is partly driven by energy-focused traders expanding into metals. Mercuria has been aggressively pursuing copper deals and is in talks to hire Kostas Bintas, a former co-head of metals at Trafigura. The industry faces a paradox: an abundance of refined copper globally, but a severe shortage of concentrates, which are essential for smelters.

While current demand for copper is subdued, both physical and financial institutions are preparing for future deficits and soaring prices. Copper trades with miners typically do not involve speculation on copper prices, but if the expected shortage materializes, traders could see substantial profits.

A large prepayment deal offered by Kazakh producer ERG has drawn strong interest from traders. ERG plans to provide about a year’s worth of uncommitted copper production from assets in the Democratic Republic of Congo, along with aluminum from a Kazakhstan smelter. These deals could raise up to $1 billion in cumulative cash. Both Mercuria and Trafigura are in talks with ERG about these offers.

ERG's Metalkol operation and Frontier mine produce about 200,000 tonnes of copper annually, while its JSC Pavlodar aluminum plant can produce 250,000 tonnes of LME-branded metal annually. Glencore has already signed a contract to purchase cathodes from ERG's Metalkol plant and is increasing its advance payment under the agreement.

ERG, Mercuria, Trafigura, and other parties declined to comment on the ongoing discussions. However, traders prepaying cash to secure supply is not uncommon, though the size of ERG's deals is noteworthy, indicating a seller's market.

It's also become easier for traders to raise funds from banks to prepay ERG since the U.K.'s Serious Fraud Office ended a long-running investigation into ERG subsidiary Eurasian Natural Resources last year.

Other recent deals suggest traders expect the tight supply of copper concentrates to persist. Several mining companies have signed contracts through 2028 on terms that were previously unheard of. These include Capstone Copper, which agreed to sell about 380,000 tonnes of copper concentrate from a mine in Arizona for delivery between 2025 and 2027, and Hudbay Minerals, which has secured contracts for copper production from Peru through the end of 2028.