Copper Wars: Miners Seize Lucrative Deals Amid Intensifying Rivalry Among Traders

Copper Wars: Miners Secure Lucrative Deals Amid Trader Rivalry

A fierce rivalry for copper among some of the largest commodity traders is creating opportunities for miners to secure advantageous terms, ranging from substantial upfront payments to extended contracts.

Energy Traders Intensify Competition in Copper Market

Recent moves by cash-rich energy traders like Mercuria Energy Group Ltd. to expand into metals — a market traditionally dominated by Glencore Plc and Trafigura Group — are intensifying competition and triggering a rush for contracts, amidst an unprecedented supply crunch in copper ore.

Miners Reap Benefits with Upfront Payments and Long-Term Contracts

Mining companies are capitalizing on this moment. Eurasian Resources Group (ERG) is seeking upfront payment for up to $1 billion of its copper and aluminum production, attracting interest from bidders including Trafigura and Mercuria, according to sources familiar with the situation. Other firms have recently signed ore-supply agreements extending well into the latter half of this decade, on highly favorable terms for the miners.

Strategic Expansion of Metals Portfolios

This competition partly reflects the impact of energy-focused traders attempting to expand their metals portfolios. Mercuria, in particular, has been vying for copper deals and is in talks to hire Kostas Bintas, Trafigura’s former co-head of metals.

Energy traders’ move into metals market signals diversification, potentially influencing competition dynamics. Mercuria’s strategic hires corroborate, Barron’s Print Edition said.

Navigating Supply Disruptions and Market Contradictions

The industry contends with disruptions and contradictions: abundant refined copper contrasts with a critical shortage of concentrates. Demand for copper is subdued now, yet players prepare for shortages and price hikes ahead. Both physical and financial sectors strategize for the future. Smelters anticipate an expanding network but face supply challenges.

The copper deals being finalized with miners generally do not involve speculating on copper prices — but they could still yield significant profits for traders if the anticipated copper shortages occur.

Economic Slowdown in U.S. Amid Inflation Concerns

Economic Slowdown in U.S. Amid Inflation Concerns

In the wake of recent economic data, concerns about the trajectory of the U.S. economy are mounting. While growth hasn’t plummeted…

High-Stakes Prepayment Deals by ERG

Kazakh producer ERG’s substantial metal prepayment deals attract traders, as sources reveal under anonymity. ERG offers a year’s uncommitted production from Congolese copper assets and Kazakh aluminum from smelters. Interested parties delve into ERG’s offerings. Sources remain anonymous due to the confidential nature of the information.

These deals could collectively raise cash in the high hundreds of millions, potentially reaching $1 billion. Mercuria and Trafigura have both engaged in discussions with ERG about these offers. ERG’s Metalkol operation and Frontier mine produce around 200,000 tons of contained copper annually, while its JSC Pavlodar Aluminium Smelter can produce 250,000 tons of LME-branded metal per year.

Glencore already has an offtake contract for cathodes from ERG’s Metalkol facility and is increasing the prepayment amount under that agreement.

ERG’s Stance on Market Speculation

ERG operates on several continents. Sharing details of every counterparty engagement is unproductive. It can lead to speculation and spread misleading information. Discussions may never materialize, the company said in response to questions. Therefore, it is policy not to share partial information until accurate facts on finalized agreements and partners can be communicated.

Shifting Market Dynamics Favor Sellers

While traders paying cash upfront to secure supply is common in commodities, the size of the deals being offered by ERG is unusually large, highlighting how the market has shifted heavily in favor of sellers.

Traders can now secure financing from banks for advance payments to ERG. This change follows the closure of a long-standing investigation. The UK’s Serious Fraud Office dropped the inquiry into its subsidiary Eurasian Natural Resources Corp. last year.

Long-Term Contracts Signal Persistent Supply Squeeze

Other recent deals indicate that traders anticipate the severe supply squeeze in copper concentrates will persist. Several mining companies have secured contracts on favorable terms that would have been unimaginable just months earlier, extending as far as 2028, according to sources familiar with the matter.

Capstone Copper Corp. will sell about 380,000 tons of copper concentrates from an Arizona mine. Deliveries will occur from 2025 to 2027. Hudbay Minerals Inc. offered some production from Peru for delivery from 2025 until the end of 2028.

Subscribe to The Washington Post and The New York Times digital bundle today for a transformative journey. Unlock unparalleled journalism from iconic publications, shaping conversations and futures. Dive into discovery, enlightenment, and empowerment.

Call Now Button