The race for copper among top commodity traders is creating lucrative opportunities for miners. With the energy sector’s significant players, including Mercuria Energy Group, expanding into metals, mining companies are negotiating favorable terms. These include substantial upfront payments and extended contracts.
Cash-rich energy traders are eyeing the metals market, traditionally dominated by Glencore and Trafigura Group. This has heightened tensions and sparked a scramble for copper deals amid an unprecedented supply squeeze in copper ore. Miners, recognizing this unique moment, are capitalizing on the situation.
Eurasian Resources Group (ERG), for example, seeks upfront payment for up to $1 billion of its copper and aluminum production. This has attracted interest from bidders like Trafigura and Mercuria. Other firms are also securing long-term ore supply contracts at highly favorable terms.
The competition reflects energy traders’ push to expand their metals businesses. Mercuria, in particular, is aggressively pursuing copper deals and is in talks to hire Trafigura’s former co-head of metals, Kostas Bintas. The industry’s current state reveals a paradox: while there is sufficient refined copper, there is a dire shortage of concentrates—the semi-processed ore required for smelters.
Copper demand is relatively low at present. However, both physical and financial players are positioned for future deficits and soaring prices. The copper deals being negotiated are not based on copper price speculation. Yet, traders stand to gain substantial profits if the forecast shortages materialize.
Kazakh producer ERG’s prepayment deals have drawn significant interest. The company offers around a year’s worth of uncommitted production from copper assets in the Democratic Republic of Congo and aluminum from smelters in Kazakhstan. These deals could collectively raise up to $1 billion. Mercuria and Trafigura have both engaged in talks with ERG regarding these offers.
ERG’s Metalkol operation and Frontier mine produce approximately 200,000 tons of copper annually. Meanwhile, the JSC Pavlodar Aluminium Smelter can produce 250,000 tons of LME-branded metal each year. Glencore, already contracted to offtake cathodes from ERG’s Metalkol facility, is increasing the size of its prepayment under this deal.
ERG commented on the situation, stating that disclosing details of every counterparty engagement is unproductive. The company prefers to communicate accurate facts on finalized agreements to avoid speculation and misinformation. Mercuria, Trafigura, and Glencore have declined to comment.
Upfront cash payments to secure supply are common in commodities. However, the size of ERG’s deals is notable, indicating a market shift in favor of sellers. Traders find it easier to secure bank financing for advance payments since the UK’s Serious Fraud Office dropped its investigation into ERG’s subsidiary, Eurasian Natural Resources Corp.
Recent deals suggest traders expect the copper concentrate supply squeeze to persist. Several mining companies have secured long-term contracts at terms that would have been unthinkable months ago. For instance, Capstone Copper has agreed to sell 380,000 tons of copper concentrates from an Arizona mine, to be delivered between 2025 and 2027. Hudbay Minerals also secured forward sales from its Peruvian operations, extending until the end of 2028.
These developments highlight the shifting dynamics in the copper market. As traders and miners navigate this new landscape, the competition for copper is likely to intensify, with significant implications for the global commodities market.
Source: Mining Weekly
