JP Morgan predicts slower copper mine growth and rising prices

“China has actually driven all of the copper demand growth we’ve seen over the past 15 years,” JP Morgan head of metals and mining commodity strategy Amy Gower said.

She also noted that growth in China’s manufacturing industry had offset current weakness in the Chinese property sector, in terms of demand for copper.

JP Morgan expects China’s demand growth to come in at 2-3% a year, slightly lower than previous years, and predicts mine supply growth at 1.7% until the end of the decade, down from 2.7% in the 2010s.

The company forecasts that slower mine supply growth will force the market to rely on scrap and secondary materials.

JP Morgan predicts a deficit in copper for this year and for 2025 and expects that prices will be on an upward trajectory, with an anchor price of around $9,500 tonnes.

On the concentrates side, a lack of mine supply and high levels of investing in smelter capacity have led to the current very low treatment charges (TCs).

Fastmarkets calculated the copper concentrates TC index, cif Asia Pacific at $2.00 per tonne on Friday September 27, down from $87.70 per tonne at the same time last year.

“We have moved toward a surplus of capacity but haven’t seen the mine side catch up,” Gower said.

Participants keep a close eye on annual benchmark negotiations for copper concentrates, which are $80 per tonne for 2024.

JP Morgan expects that the 2025 TC benchmark will be “around $30 per tonne,” Gower said.

What to understand more about what’s ahead in the copper industry? As copper prices reach record highs and analysts warn of ‘unsustainable deficits’, we explore the key trends shaping the copper market. Read more here.

China and Indonesia dominate nickel supply and demand

China and Indonesia account for 75% of the market in terms on both the supply and demand side, Macquarie analyst Jim Lennon said.

Almost 60% of nickel production was from Indonesia this year, and Lennon expects that within the next five years 75% of global production will come from Indonesia.

Two thirds of nickel goes toward stainless steel production, and Macquarie predicts 5% long-term growth for stainless steel production.

Lennon predicts that while the steel industry has previously pushed demand, the battery industry will be the key driver of nickel demand in the coming year.

The Class 1 nickel market remains heavily oversupplied, while the Class 2 nickel market is moving toward a deficit, Lennon said.

Lennon predicts that nickel prices will track sideways in the coming year.

Zinc demand to see ‘modest recovery’ in 2025

In the coming year, zinc demand will be a bigger risk than supply, according to StoneX senior metals analyst Natalie Scott Gray.

Global demand for zinc has been muted this year amid a struggling construction sector in both Europe and Asia, but StoneX predicts a modest recovery in zinc demand for next year.

“Even with [China’s] stimulus and rates [cuts], we are not seeing a pick-up in demand until the second half of next year,” Scott Gray said.

On the supply side, mine production in zinc has fallen to three-year lows, Scott Gray said, after multiple large mines in key producing countries cut production in 2023, partially due to lower zinc prices and rising energy costs.

This has resulted in record low zinc TCs, with many participants concerned that tightness in the concentrates markets will spill into the refined side.

Fastmarkets’ twice-monthly assessment of the zinc spot concentrate TC, cif China was $(50)-(20) per tonne on September 27, unchanged since August 30.

StoneX predicts refined zinc production will fall by 1.3% this year but will grow by 3.3% next year. The company also predicts that higher London Metal Exchange zinc prices, expected demand growth in China due to the stimulus package and expected mine production increases will ease current supply-side issues.

StoneX expects tightness in the market to continue to support prices until the end of the year.

Lead mine production and demand to grow in 2025

Weaker mine production, muted demand, lower prices and falling TCs continue to impact the lead market, Scott Gray said.

Fastmarkets assessed the lead spot concentrate TC, high silver, cif China at $(40)-(20) per tonne in September, down from $0-30 per tonne in January.

She also noted that China flipped from a net exporter to a net importer of refined lead this year.

However, looking forward, she expects that both mine production and demand will grow within the next year.

StoneX predicts that lead mining will increase in 2025 due to the increase in copper, zinc and silver mining. The company also predicts that demand will grow by 2.2%, compared with flat growth last year, and expects that falling interest rates will improve demand for batteries.

Macro tailwinds and modest fundamentals will result in slightly higher LME prices next year, Scott Gray predicted.

Tin prices closely track copper

Tin prices closely track copper prices as both metals will benefit from the energy transition, senior market intelligence analyst at the International Tin Association (ITA) Tom Langston said.

Tin is the best performer of the base metals so far in 2024. The three-month LME tin price was $33,458 per tonne at the end of September, up by 32.9% from $25,184 per tonne at the beginning of January.

Langston noted that the global tin market continues to face supply-side challenges, with delays in deliveries from Indonesia due to licensing issues and shipments from Myanmar down by 44% since last year.

Mine supply fell by 9% amid a drop in tin concentrates.

The ITA forecasts a deficit of 10,000 tonnes in the tin market in 2024 and expects the market to remain tightly balanced in recovery growth until 2028. It also predicts that current supply challenges are manageable and should ease in 2025.

The current shortfall in production supports higher tin prices, Langston said, and he expects that to incentivize greater production levels in the coming year.

The ITA expects that demand for tin will continue to grow due to increased demand in the electric vehicle, solar and semi-conductor industries.

Inform your base metals strategy with Fastmarkets’ price forecasts and analysis for the global base metals industry. Learn more.

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“One of the unforeseen consequences of decades of globalization has been the decline of manufacturing in the West,” he said. “If we take aluminium production as an example, there has been a stark drop in Western smelting capacity over the past 20 years.”

According to the International Aluminium Institute, aluminium smelting production in western and central Europe totaled 2.7 million tonnes in 2023, while China’s estimated production was 41.6 million tonnes.

Two decades earlier, western and central Europe produced 4.2 million tonnes of primary aluminium, while China only made 6.6 million tonnes.

Stausholm noted that Europe’s deindustrialization has been further exacerbated by recent geopolitical and civil challenges across the continent.

“The Covid-19 pandemic, the war in Ukraine and the rise of populist politics have exposed some of the cracks caused by chronic deindustrialization. Many governments are now seeking to reverse that trend,” he said.

As a result, Stausholm said that “reindustrialization is an opportunity for mining and processing companies.”

Reindustrialization alongside energy transition

“With the right support and partnerships, we can provide a secure supply of materials that are critical for economies to grow, while supporting the energy transition,” he said.

Stausholm highlighted low-carbon aluminium as a prime example of a commodity that is smelted in Western nations while simultaneously supporting the energy transition.

Fastmarkets most recently assessed the aluminium low-carbon differential, P1020A, Europe, at $0-30 per tonne on September 6.

Hydro-power-rich nations such as Canada, Norway, Iceland and New Zealand were all leading the charge to low-carbon aluminium produced outside of China. These low-carbon solutions can be promoted through the shift toward industrial policies that create green jobs while also strengthening energy security, such as the Inflation Reduction Act in the US and the European Green Deal.

But Stausholm said that these have not yet resulted in any “significant increase in output” and that “there is currently not enough evidence to suggest that Western reindustrialization has taken hold.”

Learning from China

But lessons can be learned from the successes of the Chinese industry.

“The reality is that China, and increasingly other Asian economies, are continuing to strengthen their competitive positioning and outpacing the rest of the world,” Stausholm said.

“The upshot is that there is plenty of demand to be unlocked from reindustrialization, not least if Western economies can learn from China’s example of replication at scale, delivery at speed, and a tightly integrated supply chain with supporting infrastructure,” he added.

More specifically, China is an “outlier” when it comes to the electrification of its industry.

“Addressing climate change is about electrifying society, it’s a very physical transition,” he said, and it necessarily means a heavy reliance on the grid and an increasing demand for copper, aluminium and lithium – to name a few.

According to the International Energy Agency (IEA), China’s electricity production in 2022 totaled 8,950,643GWh, up by 560% from 2000. Its consumption per capital has shown similar strength, rising by 516% over the same period.

“If the world was pushing harder to fight climate change, there would be much more demand for our materials,” Stausholm said.

Demand for copper in China rose to 15.4 million tonnes in 2023, from 1.8 million tonnes in 2000, according to Fastmarkets’ analysts.

Fastmarkets’ weekly copper concentrates TC index, cif Asia Pacific, was most recently calculated at $2 per tonne on September 27, up from the all-time low of $(5) per tonne on June 21.

“Once the world hits its stride to achieve its net zero target [for carbon emissions],” Stausholm said, “we are confident we will see even greater demand.”

Follow discussions around decarbonizing the aluminium industry with the latest price trends, market insights and forecasts with Fastmarkets. Learn more from our dedicated green aluminium hub.

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“For years, we were the price setter for copper treatment charges (TCs), being the largest concentrate producer. But now we have the new smelter in Gresik, we don’t have a need to place concentrate like we did,” Quirk said.

“It’s a major change in the market, Freeport switching from concentrate marketer to a cathode marketer,” she added.

The timing of the new smelter comes as copper concentrate supplies remain tight, which is a situation that has been exacerbated by the ongoing closure of the Cobre Panama project.

“Our smelter has been in progress for many years, so it’s not a surprise to the market. It just happens to coincide with some other supply issues at the same time,” Quirk said.

Fastmarkets’ latest assessment for its copper concentrate TC index, cif Asia Pacific, was at $2 per tonne on Friday September 27, up from $(1.90) per tonne a week earlier.

TCs are the fees that mining companies pay to smelters to have their semi-processed ore, or concentrate, turned into finished metal. Typically, tighter spot supply leads to a drop in spot TCs.

The new smelter is located in Gresik in the East Java province of Indonesia, and has the capacity to process around 1.7 million tonnes of copper concentrate annually.

“It’s a little bit of a white-knuckle time when you’re starting up something like this. It’s a very complicated operation, but our team was well prepared for it and we’ve got people on site that have expertise in smelting. We’re fortunate at Freeport that this isn’t our first smelter,” Quirk said.

But timing issues could emerge, given that the company is addressing some teething problems throughout the start-up process, according to Quirk.

“We don’t think there’s any material change, but we’re going to have some timing issues that we’ll have to work through. However, nothing out of the order,” Quirk said.

Freeport is also undergoing the application process to apply for an extension of its special mining license in Indonesia, which currently expires in 2041.

The new regulatory environment in Indonesia allows applications for a life of mine extension when a company is fully integrated and has at least 51% Indonesian ownership, criteria Freeport meets, Quirk said.

A further requirement is for the sale of an additional 10% of its stake to the state-owned company, which Quirk said Freeport is in the process of negotiating.

“We’ve been talking with the government about our commitment to continue our positive momentum and continue to invest, so that the benefits of our operations can continue well into the future,” she added.

Freeport’s copper sales in the second quarter of 2024 came in at 422,294 tonnes. The company expects sales of 1.85 million tonnes of copper this year.

Mergers and acquisitions

Mergers and acquisitions remain a discussion within the copper industry, which has recently seen a flurry of activity amid a growing recognition of the red metal’s role in the electrification and infrastructure required for the energy transition, according to Quirk.

“Everybody is looking at the fact that copper is a commodity that is going to have continued demand growth and limitations on supply development. So when companies are looking at growth and they want exposure to copper, it’s hard to do it organically,” she said.

“I think M&A will continue to be topical, but for a variety of reasons, there are not a lot of sellers, or any sellers of anything of quality. So while M&A might be talked about a lot, it may not be very actionable,” she added.

Freeport is focusing on creating long term value for its shareholders through organic opportunities but is also keeping its “ears and eyes open for what might be out there”, according to Quirk.

“You have to be prepared to act and be opportunistic when the time comes, but you can’t base your strategy on it, because you need two parties to tango, and it’s not totally in your control, as we’ve seen,” Quirk told Fastmarkets.

“We’re in the commodity we want to be in. We’ve got the right assets in that commodity and we’ve got the opportunity to grow. So we’ve got a clearly defined strategy, and execution is key to delivering it,” she added.

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“A week or two ago, people would have been bearish on China. But now, with the country’s stimulus activity combined with the actions by the US Federal Reserve [to cut interest rates], we’re seeing more positive sentiment, and that’s obviously helping copper prices,” she added.

The three-month copper price on the LME was $10,084.50 per tonne at the 5pm close of trading on Wednesday October 2, up by 1.06% from Tuesday’s close.

Key supply challenges include the ongoing demand drivers for copper used in electrification and renewable energy, the surge in demand for the metal in the electrification networks at data centers, as well as the lack of new mine projects in the pipeline, according to Quirk.

“Over the last two years, customers have been saying things are really good. There has been an overhang from China’s property sector, but it’s been more than offset with these new uses for copper. Maybe these secular trends will help reduce copper’s cyclicality,” Quirk said.

There are also concerns that higher copper prices could spur a shift to a substitute away from the metal, whereby this has typically meant a move to aluminium in previous years, although the level of substitution has been relatively small, according to Quirk.

“Over the years, where it makes sense to substitute copper out, the easy things have already been done. Copper’s property of conducting electricity is very hard to replicate, but there are certain segments that you can use aluminium, and those are being done at the margin,” Quirk said.

“But substitution hasn’t been that significant of a factor – something to the order of 1-2%,” she added.

Freeport is focusing on growing its supply, with a major internal leaching initiative as well as some development projects it plans to pursue. The leaching initiative involves using new technology to enhance the recovery of materials from its existing leach operations.

Around half of the company’s leach stockpiles are located at Morenci, which is an open-pit copper mine in Arizona. Around 16% of the total is located at Freeport’s sites in South America, with the remainder at its other operations in the US.

Freeport has already hit its initial leaching target of 200 million pounds (roughly 90,700 tonnes) at the end of last year and is looking to continue to scale this up, with an objective to get to 300-400 million lb in 2026, Quirk told Fastmarkets.

Leaching is a process that removes material from a mine and places it directly into a stockpile. These stockpiles are then irrigated with a leach comprising a sulfuric acid solution, which breaks down the material and leaches the copper mineral to allow the copper to dissolve and be collected.

“Leaching allows us to bring on additional pounds of copper at a time when our grades are low, so it’s incrementally positive from a production standpoint,” Quirk said.

“Then financially, it helps us bring down our costs in the US because the cost of these incremental pounds is below $1.0 per lb of copper and our average in the US is around $3.0 per lb,” she added.

Freeport’s copper sales in the second quarter of 2024 were 422,294 tonnes. The company expects sales of 1.85 million tonnes of copper this year.

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“We are going to come with our own decision in the coming weeks and we are in negotiations with our customers. But we will not have a number this week,” he said in an interview during the annual London Metal Exchange industry week.

Last year, Codelco offered a premium of $234 per tonne to European customers for its 2024 copper cathode contractual supplies.

This was the same as its offer for 2023 supplies and an 80% jump from 2022 contracts.

European copper company Aurubis recently settled its 2025 European contract offer at $228 per tonne, unchanged for the third consecutive year.

“The US copper market is super strong, it’s been strong for some time now, with a rebound tied to restocking and improved consumer demand. Europe has been a little bit weaker, but we haven’t seen any cuts in orders,” he said.

Fastmarkets assessed the copper grade 1 cathode premium, ddp Midwest US at 11-13 cents per lb on Tuesday October 1, unchanged since July 23.

Fastmarkets’ fortnightly assessment of the copper grade A cathode premium, delivered Germany was $170-190 per tonne on Tuesday October 1, unchanged from the prior week.

Pacheco meanwhile said that China’s recent stimulus package was putting money in domestic consumers’ pockets and would encourage growth in consumption. Recent signs of falling copper inventories and strengthening physical premiums were also a move in the right direction, he noted.

“We are seeing a growing rebound in Chinese demand. I think it’s important to take into account that Chinese copper consumption last year grew significantly, roughly 6-7%, so any percentage is on a relatively high basis of comparison,” Pacheco said.

“While people were probably hoping for better numbers, we’ve still seen around 3% demand growth so far this year. So we are confident that through the rest of the year, Chinese consumption should follow an upward trajectory,” he added.

Fastmarkets assessed the daily benchmark copper grade A cathode premium, cif Shanghai at $55-68 per tonne on Wednesday October 2, unchanged from the previous assessment. 

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The company chose Rothschild bank to help identify and select a partner to create a joint venture in which Codelco holds a majority stake of 51%.

“We have received a number of initial proposals from serious industry participants, and we are in the process of evaluating these proposals with the view to shortlist parties for further new diligence in due course,” he said.

“The process remains highly competitive, and we are very pleased with the level of interest we are seeing in partnering with us,” he added.

The plan is to select one partner, not multiple, Pacheco noted.

“It is customarily and expected by all participants that while the process is being run, we keep the identity of the participants and their proposals confidential,” he added.

The process is part of a plan by Chile’s government to boost the country’s lithium production. 

The company is also working to complete the various legal, regulatory, technical and environmental requirements, along with the respective indigenous consultation process, for its partnership with Sociedad Química y Minera de Chile SA (SQM).

The partnership was initially announced in a Memorandum of Understanding released in December 2023. It will be implemented through a joint venture in which Codelco will own 50% of the shares plus one, and will have two periods of operation: from the date the partnership becomes effective through December 31, 2030, during which SQM will oversee general management; and from January 1, 2031 to December 31, 2060, during which Codelco will oversee general management.

Starting in 2031, the state will receive 85% of the operating margin of the new production through payments to the Chilean government agency Corfo; taxes; and the profits received by Codelco as a shareholder.

“I am very pleased about the progress that we’ve made, and we continue to be very positive about the idea of finalizing the approvals and other actions during next year,” Pacheco added.

Fastmarkets most recently assessed the spodumene, min 6% Li2O, spot price, cif China at $800-820 per tonne on Tuesday October 2, down from $1,000-900 per tonne at the start of the year.

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“We interpret the current condition of the concentrates market as a dislocation from both sides of the equation. First, there is lower availability of concentrates in the market, but it also represents some excess capacity in the smelting business,” Pacheco said.

“We have not heard firm news about closures yet, but we understand that some of the smelters that are more exposed to the spot market are even more likely to close,” he added.

But Pacheco said that it was important to bear in mind that smelters in China were very cost-competitive, meaning that, even in the current market conditions, “they still have some level of resilience that will allow them to continue to operate and meet their production targets.

“We could also see cuts elsewhere in the rest of Asia, depending on the level of exposure to the spot market,” he added.

Copper smelters typically have some percentage of copper concentrate contractual supply tied to annual benchmark treatment charges (TCs), which were agreed in November last year between Antofagasta and China’s Jinchuan Group at $80 per tonne for 2024.

But the spot market has changed considerably since then, because supply tightness has worsened.

Fastmarkets most recently calculated its weekly copper concentrate TC index, cif Asia Pacific, at $2 per tonne on Friday September 27, up from $(1.90) per tonne a week earlier.

TCs are the fees that mining companies pay to smelters to have their semi-processed ore, or concentrate, turned into finished metal. Typically, tighter spot supply leads to a drop in spot TCs.

Benchmark negotiations for 2025 were currently under way.

Pacheco said that while expectations were for the parties to agree a lower number than for 2024, it was not clear what that number would be.

“For miners, and for Codelco, it is very important to have a healthy supply chain,” he said. “We’re not here only for the short term; we care about the long term and the effect of the tight industry conditions.”

How smelters would approach the talks was also uncertain, he told Fastmarkets, particularly in terms of the level of spot market exposure they would seek.

“If spot TCs are very low and the benchmark is very low, some smelters may want to wait and see what happens with the spot market,” he said. “Others might say, okay, maybe this level is bad, but it could be worse, so we are going to secure supply now.”

Codelco has been supplying the Chinese market for decades, Pacheco said, but has also been expanding its client base in South Asian markets, including India.

“Our commercial strategy is two-pronged. One of them is pursuing flexibility – we need flexibility to move in a volatile market,” he said. “But at the same time, we understand that value creation is a long-term process, so that means we value long term relationships with clients.”

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Supply and demand dynamics

The European stainless steel market – the chief source of end-user demand for ferro-chrome on the continent – has been suffering for some time, as a result of falling prices, with particular pressure from lower priced imports coming from China, sources have said. In turn, this has put pressure on ferro-chrome markets in Europe.

Olof Gill, the European Commission spokesman for trade and agriculture, told Fastmarkets that the commission was following the situation in the sector closely and is “ready to act if/when necessary.”

“The latest development on this sector was that on 25 June, the European Commission published an implementing regulation extending the steel safeguard measure for two more years, until June 2026. The Commission also made some adjustments to the functioning of the measure, to adapt it to market conditions,” Gill said.

“The prolongation and adjustments are justified by significant import pressure on the Union market, linked to increasing global overcapacity and persisting risk of trade diversion. The Commission’s investigation concluded that EU industry would suffer serious injury if the safeguard measure was lifted after 30 June 2024.”

The adjustments entered into force on July 1 this year, Gill said, and the measure will expire on June 30, 2026, a total of eight years after its first imposition, which is the maximum application period of a safeguard measure allowed under World Trade Organisation rules.

Gill added that in the next mandate, the Commission will develop a steel and metals action plan, as indicated in the mission letter of the executive vice president-designate for prosperity and industrial strategy at the Commission, Stéphane Séjourné.

“As far as European stainless steel production goes, it has been relatively low for quite a while now. It fell from a recent high of around 7 million tonnes in 2021, to 6 million tonnes in 2022, 5.7 million tonnes in 2023, and this year is likely to see it remain around 5.7 million tonnes,” Fastmarkets senior analyst Robert Cartman said.

He added, however, that this demonstrated that most of the demand destruction may have already happened before this year, with production levels stabilizing.

“There is some nuance here, in that stainless steelmakers have been making relatively greater use of stainless steel scrap ahead of primary raw materials in recent years – a response to price signals and environmental regulation,” Cartman added. “The relative cheapness of scrap has diminished as a result. So, perhaps the demand destruction has been amplified slightly by this trend.”

Having come off the extreme peaks seen in 2022 in the immediate aftermath of the Russian invasion of Ukraine, European high ferro-chrome prices in particular still remained relatively robust throughout much of the past couple of years, despite the significant drop in European demand.

“In large part that is because Chinese growth in stainless steel production helped to offset the falls elsewhere, such as in Europe. And China, just like Europe, largely relies on imports for its chromium needs. And both China and Europe in turn rely on imports from South Africa,” Cartman said.

But the price support that kept, for example, the price of ferro-chrome high carbon 6-8.5% C, basis 65-70% Cr, max 1.5% Si, delivered Europe above $2 per lb Cr for such a prolonged period has faded in recent weeks, with sellers appearing to be in greater competition with one another, as falling end-user demand has pushed inventories up.

The India question

Around the end of 2023, growing numbers of market participants were reporting increasing levels of Indian supply coming into the high carbon market initially, but also the low carbon market.

Debate at the time centered on India’s ability to produce high and/or low carbon ferro-chrome of comparable quality – particularly with a minimum of 65% chrome content but also with impurity levels within accepted tolerances – to that coming from “traditional” origins.

But by December of that year, the eruption of hostilities in the Red Sea had created major challenges for shipments coming to Europe from India, and the question appeared to become moot, at least for a time.

Since then, however, the situation appears to have changed again, with higher grade production reportedly continuing to grow in India, and to come to Europe, especially in the low carbon ferro-chrome market.

“Looking at some of our trade data, India appears to have gone from a position of importing zero chromium ore from Albania in the years prior to 2023, to beginning imports later that year and, during the first half of 2024, importing around 10,000 tonnes,” Fastmarkets’ Cartman said.

One of the key stumbling blocks reported in India’s ability to produce higher grade material was its access higher grade chrome ore – and the implication of increased imports from Albania would be that this hurdle may now be gone, or at least have become smaller.

The country has also begun to import more ferro-silico-chrome from China, Cartman said – a further key component in producing higher grade alloy.

“With regards to India’s imports of ferro-silico-chrome from China, again these have increased. It was more or less zero in the years prior to 2023, then around 2,500 tonnes last year, and, during the first half of this year, around 5,000 tonnes,” Cartman said.

While Fastmarkets does not currently have exact figures for the total low carbon ferro-chrome production capacity in India, estimates suggest it could be up to 100,000 tonnes per year.

“It will be at least 20,000 tonnes based on export data, but is probably closer to 100,000 tonnes based on overall ferro-chrome production in the country and the typical percentage that is allocated to production of low carbon material,” Cartman said.

While sources on the sell side in India have continued to report that freight-related issues have stymied efforts to move lower grade high carbon ferro-chrome into Europe – for example, ferro-chrome high carbon 6-8.5% C, basis 60-64.9% Cr, max 3% Si – this has been less of an issue in higher value markets such as low carbon ferro-chrome, where margins are larger, it has been suggested.

“Freight is [not much] in terms of the margin,” a sell-side source in Europe said earlier in September. “The cost is much lower than market sales prices inclusive of freight.”

Long-term contract negotiations

As contract negotiation season nears, market participants have said they are still looking at a variety of options in place of the former European quarterly benchmark.

Some buy side sources have flagged that they have seen continued confusion about what mechanism will be used going forward, with reports that there is still no single clear direction for market participants to take.

Among them, however, some have said they do expect to have a solution ready with September coming to an end.

Others have said they intend to use a combination of Fastmarkets’ prices, such as its ferro-chrome 50% Cr import, cif main Chinese ports and ferro-chrome high carbon 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe price assessments.

And still others have said they intend to use one or more of these price assessments alongside another source such as monthly tender prices from China as part of their own formula.

For some, the discontinuation of the benchmark has had little impact.

“We didn’t use it before as a reference,” a ferro-chrome seller said earlier in September. “[In terms of timing] I think it’s going to be the same as last year – negotiations will probably start in November, but I think closing of contracts will be somewhere during the first quarter of next year.”

And there are other considerations to take into account, such as the ongoing challenges in the macroeconomic backdrop, with difficulties in end-user markets contributing to generally weaker demand for ferro-chrome in Europe.

Historically, negotiations would have been complete before Christmas, according to the ferro-chrome seller, but this is no longer the case.

“I see [buyers] collecting information and starting to talk in November and December, and then some partial quantities are [finalized] in January and February,” the seller said.

“It looks like the visibility is short, on both the buy and the sell side. [For example] the buyer doesn’t really have visibility [on their needs] for more than two months.”

The China question

Across various conversations since the discontinuation of the European benchmark, the importance of a reference to the Chinese market, as the world’s largest producer and consumer of the material, has been clear.

And as markets begin to look ahead to 2025, movements in China are expected to remain very much on the radar.

“Just as China has been important in driving [some] ferro-chrome prices higher and keeping them high, so the country needs to be looked at now that prices appear to be going into reverse,” Cartman said.

“There has been some talk that Chinese stainless steel output growth may finally slow, as has already happened with carbon steel. And the latest trade data for August may indicate that, with Chinese imports of chromium ore, [charge chrome], and ferro-nickel all at lows not seen since February-March 2024 and since January 2023 in the case of ferro-nickel,” Cartman added.

In terms of the outlook, it may be time for something of a normalization of both chrome ore and ferro-chrome prices, Cartman said.

“A slowdown in [Chinese] stainless steel production growth combined with an improving supply situation in South Africa are our expectations and would suggest that some of the air will be taken out of the market, though these markets have defied gravity for a while,” he said.

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Apparent demand is expected to recover by 1.4%, rising to 127 million tonnes in 2024, Eurofer said in the latest report in July – a downward revision from the previous, more optimistic, forecast from the end of April, when it predicted a 3.2% recovery to 130 million tonnes.

Notably, the automotive and construction sectors, the two key steel-consuming sectors, are both facing downturns.

Automotive is now expected to decline by 3% in 2024 (revised down from a 0.4% decline in a previous outlook) before recovering in 2025, with a predicted increase of 2.3% (up from a previous estimated growth of 0.8%).

“We have around 20% fewer orders from the automotive sector year on year,” a steel service center source in Germany told Fastmarkets.

One of Germany’s leading car producers, Volkswagen, is considering closing of some German factories, claiming that the transition to electric vehicles (EVs) has been “brutal” for the European car market.

The downturn in the automotive sector was reflected in Eurofer’s latest quarterly report.

“Uncertainties around the [introduction] of EVs and delays to launches of new models – many of them, hybrid or fully electric vehicles, preparing the ground for the ban on petrol cars in the EU by 2035 – have proven [to be] unsupportive factors [in terms] of consumer demand. Coupled with the lack of facilities such as recharging points, they have also delayed investment decisions by carmakers,” Eurofer said in the report.

Construction, which is the largest steel-using sector and represents 35% of total steel consumption in Europe, is widely expected to have declined for the second year in a row in 2024, although Eurofer predicts the decline in construction activity will slow to 1.4% rather than its previous prediction of a 1.9% decline.

Despite the looming challenges, however, European steelmakers remain committed to the green steel transition and expect the market for green steel to grow exponentially in the upcoming years.

Public investment in ‘Green Steel Hubs’

The EU is fully committed to the transition to green steel, with multi-billion investment projects announced and more than 50 million tonnes of new steelmaking capacity expected to come online in 2025-2027, according to Fastmarkets estimates.

And in 2023-2024 alone, more than €10 billion ($11.1 billion) in public investment has been granted by European governments to finance new green steel capacity among producers in Germany, France, Spain and Sweden, among others.

“The steel sector is a backbone of the European economy. To meet EU’s climate goals, it needs support, especially [at a] time like this,” a mill source told Fastmarkets.

Green steel premiums a challenge

In the past few years, European steel producers have accelerated their decarbonization efforts and the new market for steel with a reduced-carbon footprint has emerged. with all the major flat steel suppliers in Europe developing  their own green steel brands – XCarb, Arvzero, SSAB Zero, Bluemint, Greentec, among them.

But there is no common standard or official definition for “green steel” as yet.

Fastmarkets’ methodology, however, provides a the following definition for European green steel: “Steel produced with Scope 1,2 & 3 emissions of maximum 0.8 tonne CO2 per tonne of steel.”

Sources estimate that green steel volumes traded in Europe have amounted to about 100,000 tonnes so far in 2024.

Offers for green steel produced in European electric-arc furnaces and with emissions for Scope 1,2 and 3 of below 0.8 tonnes per 1 tonne of steel were reported at €200-350 per tonne in September.

However, most buyers estimated the achievable premiums for green steel with Scope 1, 2 and upstream Scope 3 emissions below 0.8 tonnes of CO2 per tonne of steel at closer to €100-200 per tonne. 

“Premiums of €250-350 per tonne can be achieved for steel sold under long-term contracts. In the spot market, but it is possible to get lower prices,” a buyer source said.

Notably, recent trades for steel with Scope 1, 2 and upstream Scope 3 emissions of less than 0.8 tonnes of CO2 per tonne of steel were reported at €100-150 per tonne in September, with some transaction undercutting the mark of €100 per tonne, Fastmarkets reported.

“This year [2024] started on a positive note, but [overall] steel demand is deteriorating, the steel market is weak in general and the willingness to pay a premium [for green steel] is not there,” a mill source told Fastmarkets.

Market participants said there was a lack of projects across Europe requiring green steel and that demand from the key consumer – the automotive industry – had also been slowing down lately, in line with the general downturn in the steel sector.

And Fastmarkets’ steel hot-rolled coil index, domestic, exw Northern Europe, fell to its lowest level since November 2020 when it dipped to €549.88 per tonne on September 25, down by €2.83 per tonne from €552.71 per tonne the previous day

And there have been no signs that the downtrend in the carbon market has stopped, sources said, with short-term expectations among market participants were quite bearish given the lack of end-user demand.

“This year [2024] is a lost cause; [There are] No signs of demand recovery until the year-end and European mills are selling [HRC] at prices below costs to fill order books,” a steel service center in the Benelux area told Fastmarkets.

As a result, European suppliers have also started to be more flexible with their green steel sales prices and have been offering discounts for bigger lots, sources said. 

Fastmarkets’ weekly price assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €100-200 per tonne on September 19, stable on-week.

Decarbonization remains the priority

Despite the limited demand for green steel and the difficulties with charging a premium for it, most market participants said they remain optimistic that green steel will take off in Europe in the coming years.

“The transition to green steel is still on the cards – it’s coming; it’s inevitable. But considering the current economic situation [in Europe], it is going to be delayed,” a source at a large buyer in Northern Europe said.

One of the major drivers behind the decarbonization of steelmaking in the EU and globally remains the European Carbon Border Adjustment Mechanism (CBAM) – a tool intended by the EU to put a fair price on the carbon emitted during the production of carbon-intensive goods that enter the trading bloc.

The CBAM will be phased in, starting from January 1, 2026, alongside the phasing-out of the free carbon allowances applicable under the European Emissions Trading Scheme (ETS).

The price of CBAM certificates will be calculated by the European Commission on a weekly basis, based on the average price of the closing EU ETS carbon dioxide (CO2) allowances for each week.

The price of a carbon emissions permit in the EU was €66-70 per tonne in September 2024. And the EU envisages that the free allocation of such permits will be fully eliminated by 2034.

Market participants told Fastmarkets that CO2 allowance prices will jump to €200-250 per tonne when the free allocations are halved in 2030, and that there will be a surge above €400 per tonne by 2034, when free allocations are fully phased out.

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“Just as an example, to do these projects, we need more than 400 permits to be able to get moving,” Arriagada said, referring to the company’s plans to expand copper production to 900,000 tonnes per year in the next three or four years, from 700,000 tpy.

A scarcity of copper concentrate supply from mines has forced down the treatment costs that smelters charge miners for material. Fastmarkets’ copper concentrate TC/RC index began to fall in November 2023 and has hovered near all-time lows so far in 2024.

Fastmarkets calculated the weekly copper concentrates TC index, cif Asia Pacific, at $2 per tonne on September 27, up from $(1.90) per tonne a week earlier.

Market dynamics were exerting a significant effect on negotiations for long-term agreements.

Nicholas Snowdon, head of metals and mining research at Mercuria, pointed out that the appearance of negative treatment and refining charges (TC/RCs) in the concentrate markets was “historically unprecedented,” indicating the strains on supply.

He added that this was “creating dislocations and volatility in both the physical market and the paper market,” making it necessary for “further risk mitigators to come in and support that function for market participants.”

New copper regions emerging

The copper supply landscape was evolving, with different regions presenting unique advantages and challenges.

Snowdon noted that the Democratic Republic of Congo (DRC) and Zambia “have gone from being the fourth- or fifth-biggest area of copper production, if you go back to the end of the last decade, to now [being] essentially just behind [the leading supplier] Chile.”

Snowdon added that this success story “does look to have momentum [that will continue] over the next couple of years.”

Arriagada highlighted the comparative advantages of different regions. “In the case of the DRC, grade is obviously a key element,” he said. “If you look at places such as Chile or Peru, grades are lower, but the deposits tend to be larger… They sit in places that have different political contexts.”

He also noted that Chile was a member country of the Organization for Economic Co-operation & Development (OECD), where “logistics are much simpler.”

“We spend less than 10 cents per lb on logistics,” Arriagada said. “In some places in the DRC, you [need to] spend ten times more.”

Argentina was also attracting attention as a potential region for new copper supply. “Some of the changes are very positive,” Arriagada said. “What’s been happening in Argentina, and what we’re seeing in terms of signals – we wait to see how those consolidate over time.”

What to understand more about what’s ahead in the copper industry? As copper prices reach record highs and analysts warn of ‘unsustainable deficits’, we explore the key trends shaping the copper market. Read more here.

Environmental paradox

Metals such as copper were needed to fight climate change, but their mining operations were a major contributor to greenhouse gas emissions.

Publicly listed mining companies, such as Antofagasta, were coming under increasing pressure from shareholders to minimize their carbon footprint, but implementing green mining technologies would add further to the costs of production, delegates heard.

Antofagasta’s operations were now “running fully on renewable energy,” Arriagada said, with 90% of water use expected to come from desalination by 2026. The company has also begun to use autonomous fleets and water recovery technologies.

Tora Leifland, head of public affairs at Volvo Construction Equipment, said that significant productivity gains could be derived from electrically powered equipment. For volume production of machinery, for example, she said, it was necessary to bring the cost down.

The mining market has seen a number of significant acquisition attempts recently, the largest being BHP’s attempted takeover of Anglo American.

“We look at [mergers and acquisitions] from the point of view of the extent to which it will allow production actually to increase, or reach the market in shorter timeframes,” Arriagada said. “Therefore, [such activity is] based on synergies – which is, I think, the key element that one would look at.”

Kenta Saito, general manager of the base metals division at Mitsui & Co, suggested that while M&A could be one approach to increasing supply, “the ultimate objective is really to increase every tonne of copper or whatever that is being produced.”

The panel at the event emphasized the need for increased dialogue between industry and governments on critical minerals supply.

Leifland called for supportive policies such as carbon pricing. “If you get the incentives right on a global level,” she said, “ideally, a lot of positive things will follow.”

Find out about our market-reflective copper price data spanning the copper supply chain, from copper concentrates and copper wire to copper scrap. Learn more.

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