12 May 2021 - Volatility in copper markets has pushed copper sulphate suppliers to quote daily spot prices versus weekly or monthly pricing. Quotes good at the beginning of the week may be unavailable by the end of the week as copper prices continue to push all-time highs.
“We are going daily spot for pricing this week and not setting a price for the week due to the uncertainty of copper metal,” a North American copper sulphate reseller said.
“Our prices are good for 48 hours only right now and strictly bound to a quantity,” a European trader said.
Copper sulphate is made up of 25% copper and prices have been rising alongside copper metal for several weeks. Buyers, concerned about further increases in copper, have been buying up inventory rapidly. Timing conditions on offers have appeared in the last couple of days.
In the US, copper sulphate at the producer level was priced from $1.37-1.41/lb DDP Midwest during week 18 while distributors sold existing stock at $1.33-1.35/lb DDP Midwest. By Tuesday 11 May, US price offers had moved to $1.38-1.45/lb DDP Midwest.
FOB Brazil prices were seen at BRL 13.00-14.00/kg ($2.48-2.67/kg or $1.13-1.21/lb) on Friday 7 May and moved to BRL 15.00/kg on 11 May.
Similarly, in Europe on Friday 7 May, the spot range for bulk deliveries was €2,450-2,600/tonne DEL NWE. By Tuesday 11 May, product was offered at €2,550-2,660/tonne DEL NWE.
Last week’s copper sulphate quotes disappeared and new quotes emerged after copper prices reached an all-time high on Monday 10 May.
The three-month copper contract price on the London Metal Exchange (LME) closed at $10,720/tonne ($4.86/lb) on 10 May, up $364/tonne from Friday’s high of $10,356/tonne on 7 May.
Copper prices have more than doubled from a multi-year low hit nearly 14 months ago when the COVID-19 pandemic caused global markets to tumble. Three-month contract prices are up by 125% from a low of $4,774/tonne on 27 March 2020.
“Late last week, we could get copper sulphate for $1.34/lb DDP Midwest. Monday it was $1.38/lb. Today, we do not have any quotes,” a North American premixer said on 11 May.
Supply was not an issue; however, supply chain problems and copper metal costs were pressuring market prices.
“Like the rest of the world, there are delays on containers,” a North American distributor said. “Availability of product is good, but containers are delayed a couple of weeks.”
North America is a large resell market for copper sulphate. Distributors purchase direct from the producer and then wait several weeks for the material to arrive. By the time it does, the market price may have changed significantly.
In March, Peruvian-origin product was sold at $1.20/lb DDP US West Coast, and only made it into the US spot market a couple of weeks ago amid the ongoing supply chain delays and congestion at West Coast ports.
Distributors have largely exhausted their supplies and have returned to the market to replenish inventories in the face of higher prices.
“It is difficult to grab the market these days – bit like catching a flying arrow,” a copper sulphate trader said.
Copper market
Meanwhile, investors continue to face concerns that copper supply will not be able to keep up with rising demand amid increased investment in electrical grids, construction, and carbon-neutral goals that will focus on using copper.
Robust economic data, the reopening of major global economies, and COVID-19 recovery optimism supported by vaccination rollouts in some countries have also supported sentiment.
Supply concerns mounted further on Thursday 6 May when Chile’s Congress approved a mining royalty that mining companies said would severely limit future investment in the world’s biggest copper-producing country.
Chile's National Mining Society (Sonami) has warned that the royalty project proposes levels of taxation that are "akin to expropriation" and would paralyse investment.
The legislation now heads to the country's Senate. The bill proposes a base rate royalty of 3% on copper and lithium sales, as well as other metals. But in the case of copper, as prices soar, so too would the tax, with marginal rates beginning at 15% of sales for prices between $2.00-$2.50/lb and cresting at 75% of additional income at prices of over $4.00/lb.
Alternative metal additives and feedstocks
Zinc sulphate, a possible alternative, is priced lower than copper sulphate. However, according to buyers, the micronutrient is up by 80% from earlier this year because of high sulphur costs.
Sulphur prices have surged alongside copper. The Tampa contract moved up by 100% from $96/tonne to $192/tonne in April. Sulphur is a by-product of refinery processing. The refinery shutdowns during February’s winter storms in Texas contributed to the price increase, but the overarching issue is that demand for refined petroleum products has been subdued for about a year due to reduced driving and flying. Refineries have accordingly been running at reduced rates for some time, producing less sulphur.
Zinc oxide is another alternative. However, prices are currently higher than copper sulphate.
Copper sulphate pricing
Sources of copper sulphate typically include copper ore, copper electrolyte, copper cathode, copper hot shot and copper etchant. The most common source, however, is copper scrap.
Regardless of the source of the copper, most global producers base copper sulphate prices on the LME price, which represents Grade A copper cathodes. Suppliers look at the increase or decrease in traded copper prices and add or subtract ~25% to copper sulphate formula prices.
However, ongoing supply chain constraints have more than doubled the cost of freight between some destinations, so higher freight costs would also factor into LME formula-based copper sulphate spot prices.
Suppliers were facing higher costs both for the volumes they received and to dispatch the finished material to customers.
To be able to apply stock exchange prices to purchase/sale transactions of the products to which the LME copper quality standard is not applicable (i.e. all types of copper-bearing materials like copper concentrates, copper scrap, or more processed products like copper wire rod), market participants have developed a premium and discount system. It allows the settling of a market price for a product that considers its processing stage, its physical state, and its chemical make-up, as well as the cost of transport and insurance to an agreed delivery destination and the current availability of the metal in each location.
As the cost of transport has escalated since Q4 2020, suppliers have seen premiums over the LME emerge for their raw material copper source where discounts may have been applied previously.
Copper sulphate demand
Demand for copper sulphate was seen as robust across all sectors in May.
In Mexico, growers have been stocking up their warehouses in anticipation of the rainy season. Growers use copper sulphate as a fungicide on avocado crops. The rainy season in Mexico runs from May to September.
Demand from the mining sector also remained strong as metal prices continued to rally. Copper has been among the best performers in a month when metals ranging from aluminium to iron ore have surged to their highest level in years. While demand surged, supply was constrained following shutdowns during the pandemic.
Feed consumption has increased in Brazil because there are more ruminants on feed as opposed to being on pasture. Feeders are requesting higher-quality feed ingredients so that they can bring the animals to market weight sooner and meet strong export demand.
In the US, the water treatment sector recently completed its spring buying, which provides a seasonal boost to demand.
North America will soon be entering what in most years is a slower season, as the summer months usually mean decreased volumes. However, the high cost of ocean freight and feedstocks, plus a full year of tight inventories because of supply chain constraints, is supporting prices.
