Russia Boosts Copper Concentrate Exports to China

Exports of copper concentrate from Russia to China surged by 36% year-on-year in the first nine months of 2024, reaching 310,000 tonnes, according to data from China's General Customs Administration. In September alone, shipments rose one and a half times to 35,000 tonnes.

While concentrate exports increased, Russian exports of finished copper products like wire, profiles, sheets, tubes, and bars to China fell by 18% year-on-year, totaling 226,700 tonnes for the same period.

China, the world's largest consumer of copper, relies heavily on imports of copper concentrate, as it only ranks fourth globally in copper ore production. China imported a total of 21.06 million tonnes of copper concentrate in the first nine months of 2024, a 4% rise compared to the previous year. The country's drive to secure raw materials has seen the easing of restrictions on processing complex copper concentrates and allowing private companies greater participation.

One of the new projects on the horizon could involve moving copper smelting operations to China, specifically to Fangchenggang in Guangxi province. This move aims to navigate challenges brought on by sanctions and ensure better market access and smoother financial transactions. The planned smelting plant could have an annual capacity of 500,000 tonnes of refined copper, putting it right in the heart of China's massive copper consumption hub.

Despite the ongoing Western sanctions, broader restrictions on trading Russian aluminum, nickel, and copper have impacted the industry. The United States, as of April 2024, banned the import of these metals from Russia, while the UK followed suit, blocking their trade on the London Metal Exchange.

Aside from this, other key Russian copper producers include Ural Mining and Metallurgical Company, Russian Copper Company, and Udokan Copper. Copper production increased by 7% year-on-year to 326,000 tonnes from January to September 2024. By year-end, output is forecasted to reach between 334,000 and 354,000 tonnes.

Maxim Khudalov, chief strategist at Vector Capital, attributed the rise in copper concentrate exports to increased capacity at Bystrinsky GOK and Udokan Copper. He noted, however, that profitability has decreased by 2-3% due to the use of intermediaries following sanctions. Logistics costs now account for up to 10% of the price of exporting concentrate and at least 2% for ingots.

China's demand for copper continues to grow, particularly due to its expanding production of electronics, solar panels, and electric vehicles. The country's output of electric and hybrid vehicles jumped 32% year-on-year, reaching 8.31 million units in the first nine months of 2024, according to the China Association of Automobile Manufacturers.

Despite this growth, new copper projects are facing challenges. High copper prices, which reached $9,300 per tonne as of mid-November 2024, make these projects economically challenging, according to Boris Krasnozhenov, head of securities markets analytics at Alfa Bank. By year-end, copper prices could reach $10,000 per tonne, driven by increasing demand and supply disruptions in major producing countries like Chile and Peru.