Rising DRC copper exports to offset Zambian disruption

Rising copper cathode exports from the Democratic Republic of Congo (DRC) to Europe could offset supply disruptions in Zambia amid weak consumption on the continent.

Copper cathode exports from the DRC rose to 44,306t between January and April, up by 1.8pc from the same period last year, official custom data show. DRC imports accounted for 7.9pc of total cathode imports into Europe over the first four months of this year.

Zambia exported 11,896t of cathode in January-April, equivalent to 2.1pc of total deliveries to Europe. Although Zambian's copper exports for the period increased by 28.4pc year on year, the country is behind the DRC in export volume.

The DRC is Africa's largest producer of refined copper and Zambia is its second-largest producer.

Zambia's copper output has plunged this year as a number of unplanned outages hit operations. The Zambian government raised mining royalties and import duties on copper concentrates, which also disrupted production.

Copper output this year is expected to fall by 100,000t, or 11.6pc, compared with 861,946t in 2018, according to industry lobby group Zambia Chamber of Mines.

An ongoing legal dispute between the Zambian government and UK-based Vedanta Resources over Konkola Copper Mines (KCM), which started in May, has also disrupted operations.

Trading firm Glencore's Mopani Copper Mines' shutdown for the rest of this year for a major refurbishment will also cut the country's output.

But the disruptions in Zambia have not prompted concern among market participants as the country is a minor supplier compared with Russia, which accounted for just over a quarter of the 1.99mn t of copper cathode imported in Europe last year, official customs data show. Zambia delivered 32,072t to Europe last year, which is equivalent to 1.6pc of total copper imports to Europe.

"Vedanta's KCM is virtually meaningless. The impact on the market is zero," a trader said.

Growing exports from the DRC since last year can replace lost output from Zambia.

The DRC exported 133,477t of cathodes to Europe in 2018, up by 22pc from 93,002t in 2017. DRC copper cathodes accounted for 5.7pc of total imports to Europe, and the country was the sixth-largest supplier last year.

In addition, weaker-than-expected consumption in Europe has limited the effect of Zambia's supply disruption. European consumers are sufficiently supplied by existing long-term contracts, which concluded in the fourth quarter.

"Most consumers are consuming less, demand is much lower, and there is no additional demand. Long-term contracts are being fulfilled. There is lots of material arriving in Europe," a copper product manufacturer said.

The Argus in-warehouse Rotterdam premium for grade A copper cathodes averaged $32.31/t in the first quarter. European spot premiums were stable over the period as the market is well-supplied with little additional spot demand.

Other copper exports

Zambia predominantly produces and exports copper anodes that require further refining. Anodes accounted for approximately 73pc of Zambian exports of copper products last year, while cathodes represented about 26pc.

In contrast, the DRC's copper product exports were led by copper cathodes — approximately 88pc — while anode exports accounted for about 10pc of total deliveries.

"In the markets for copper belt products, most go to China but a good share go to the Middle East, in particular the low-grade cathode. The difference is that the exports of blister and anodes from Zambia certainly will be a lot less than in recent years," the International Copper Study Group said.

The country also produces off-grade cathodes, which have no uniform standard and have varying levels of copper content and impurities. Some European market participants use off-grade material from Zambia, but no supply disruption has been reported.