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The world refined copper deficit through August shrank to an estimated 107,000 mt from the 138,000 mt deficit calculated through July, the International Copper Study Group said Nov. 22.

Refined copper production in August reached 2.09 million mt, outpacing 2.04 million mt of estimated usage, according to data provided in the ICSG monthly copper market report.

“Although global demand started to recover in the second half of 2020, refined usage still remains below pre-pandemic levels in most countries,” ICSG said.

The industry group said ex-China refined copper usage over the first eight months of 2021 is estimated to have increased by about 8.5% compared to the same period of 2020, but usage is still 4% below levels in the same period of 2019.

Conversely, year-to-date Chinese apparent usage through August declined by 2.8% year over year with net refined copper imports sliding 27%, ICSG analysts said. This drop partially offset usage growth in other regions of the world, they added.

The world refined copper balance adjusted for changes in Chinese bonded stocks indicated a market deficit of about 120,000 mt.

Refined copper production rises 2.1%

ICSG analysts said global refined copper production in the first eight months of the year rose 2.1% year over year to 16.45 million mt, with primary production and secondary production up 1.2% and 6.5%, respectively.

Copper refinery capacity utilization worldwide stood at 81.4% over the eight-month period.

In the period, refined output grew 5.8% in China, 11% in the Democratic Republic of Congo and 11.5% in the US.

Chilean refined copper output fell 5% in the January-August period, compared with last year, due to an 8% reduction in electrowinning refined production caused by outages, ICSG said.

The ICSG estimated smaller copper output declines in Brazil, Germany, Japan, Myanmar, Spain, Sweden and Russia due to various maintenance, operational issues and shutdowns.

Secondary refined copper production from scrap increased by 6.5% year over year.

Copper mining output grows 3.3%

Preliminary estimates indicate that world copper mine production climbed 3.3% during the January-August period to 13.89 million mt, ICSG said.

ICSG reported a 5% lift in concentrate production and 4% drop in solvent extraction-electrowinning output.

Many major copper mining countries, including Peru, posted gains in production over the eight-month period, compared with the same period last year.

“Output in Peru, the world’s second biggest copper mine producing country, increased by 10% due to the fact that March-May 2021 production was up by 35% from a constrained March-May 2020 during which time the industry was severely impacted by a COVID-19 related country lockdown,” ICSG said. “Despite the recovery this year, production over the first eight months of 2021 was still 8% below that of the same period in 2019.”

Mined copper production rose 57% in Indonesia on the continued ramp-up of underground production at the Grasberg mine.

Miners in the DRC and Panama increased copper output by 11% and 85%, respectively, due to additional output from new or expanded operations.

However, Chilean output slightly declined through August.

“Production in Chile, the world’s biggest copper mine producing country, was down by 1.5% over the first eight months of this year with a 1% growth in concentrate production being more than offset by an 8% decline in SX-EW output mainly at the Escondida mine,” ICSG said.

LAUNCH REPORT

Japan’s crude steel production in October reached 8.22 million mt, rising 1.0% from September and 14.3% higher year on year, Japan Iron & Steel Federation data showed Nov. 22.

The firm start to the fourth quarter was due to strong demand from the country’s manufacturing sector.

The ease in pandemic restrictions and a ramped-up vaccination program that promoted domestic economic activities led to the au Jibun Bank Japan Manufacturing Purchasing Managers Index for October to reflect an expansion to 53.2 from 51.5 in September.

Of the overall output, 6.01 million mt came via convention blast furnaces, down 0.2% from September but up 13.4% against October 2020, while electric arc furnaces manufactured 2.21 million mt of crude steel in October, a 4.3% month-on-month gain and a 16.6% jump year on year.

With the October data summed up, crude steel production in the first 10 months of 2021 totaled 80.36 million mt, 17.5% higher on the year. Though if compared to the same period pre-COVID-19, 2021’s January to October output has recovered to just 4.1% shy from 2019’s production.

Downstream, in Japan’s finished steel production, 5.61 million mt of hot-rolled products were made in October, up 1.4% and 10.5% higher from September 2021 and October 2020, respectively.

Wide strips formed the bulk of the HR production at 3.26 million mt, a slight 0.5% gain from September and 10.1% higher annually.

Year to date, as of October, HR products totaled 54.76 million mt with wide strips making up 33.12 million mt. The former was up 11.7% while the latter grew 17.0% on a year-on-year basis.

Demand for automotive steel is expected to fall following local vehicle production and sales targets cuts for the financial year ending March 31, 2022.

For instance, Toyota Motor Corp. announced Nov. 4 that it lowered its annual production forecast to 9 million vehicles from 9.3 million vehicles it previously projected in May, citing a global shortage of semiconductor chips and the coronavirus.

Similarly, on Nov. 5, Honda Motor Co. cut its annual vehicles sales target by 650,000 to 4.2 million units for the financial year ending March 31, 2022.

The Russian legislative assembly has enacted changes to the country’s tax code that introduce an excise tax on liquid steel expected in force from Jan. 1, 2022, to replace the current 15% export duty on steel.

The new tax is based on Russia’s slab and billet export prices, as well as domestic prices of steel scrap; its link to the foreign currency is seen as a risk.

The tax changes passed three readings in Russia’s legislative assembly Nov. 18 and are on the way to be approved by the Federation Council (the upper house of the parliament) before being signed by the president will introduce from 2022 an excise tax on liquid steel, according to the information on the website of federal Duma, the assembly.

The excise – as an additional revenue to the state budget – will replace Russia’s 15% tax on ferrous (and base) metals exports (in place since August) that will expire in the end of December.

For blast furnace-based producers, the excise will be calculated as an average dollar denominated monthly export price of slab – on an FOB basis – in Russia’s Southern federal district ports, multiplied by a royalty interest coefficient of 0.027 and the monthly average dollar-ruble exchange rate. The excise will drop to zero in the event of slab price sinking below $300/mt FOB.

With Rb71.36/1$ October’s average exchange rate and October CIS slab price – as assessed by Platts – of $687/mt FOB Black Sea (equates to Rb49,028/mt), should the excise be applied in November, it would have come to Rb1,320/mt, Platts estimates.

The excise for electric arc furnace-made steel – to be payable by both standalone EAF producers and major steel companies owning EAF mills – will be based not on slab, but on the price of steel scrap, billet and ferroalloys and hence looks more complex.

The excise for EAF-made steel will be calculated as an average dollar denominated monthly export price of billet – on FOB basis – in Russia’s Southern federal district ports, multiplied by the monthly average dollar-ruble exchange rate, cleared of the monthly average CPT price for heavy melting steel scrap (Russian grade A3) in Russia’s Ural Federal District, cleared of Rb12,500 historic billet-scrap spread and of 50% of the EAF mills’ average monthly expenses on ferroalloys and alloying additives. The final then is multiplied by a royalty interest coefficient of 0.3.

For example, with October average CIS billet price – as assessed by Platts – of $637/mt FOB Black Sea (equates to Rb45,460 at October exchange rate), Rb25,550-26,000/mt CPT Urals October scrap price (according to ratings agency Rusmet), Rb12,500/mt spread and 50% of the $35-$50 (Rb2,500-3,570)/mt ferroalloy expenses per ton of steel, November’s excise for EAF-made steel could have come to Rb1,630-1,760/mt.

Levied on steel produced, not sold

The good news, though, is that the maximal excise level for the EAF-made steel is limited to Rb1,000/mt, which more or less protects EAF operators from currency fluctuations; for BF-made steel there is no cap though and the BF-based mills will be much more exposed to any slip in Ruble value.

“With dollar currently worth Rb72, theoretically, our excise would have been Rb1,050-1,100/mt, a source at an EAF-based mill said. “Should the exchange rate shift to Rb75/1$, the excise would move up to Rb1,250/mt, but luckily we will never be paying more than Rb1,000/mt on any formula outcome above Rb1,000/mt.”

For BF-based companies, the excise is made too sensitive to the exchange rate, meaning any ruble depreciation will automatically lift the tax and later will be applied to the whole output, while only a part of mills’ revenues comes in dollars and foreign currencies.

The other causes of discontent is that the excise – unlike the current export tariff – will be levied on steel produced, rather than sold, meaning even unsold and unrolled volumes are going to be taxed.

“Sold or not, rolled or not – all made steel will be taxed,” an industry source told Platts.

That said, the steel excise is seen as the lesser evil compared with the 15% export duty.

“The full year of the excise will withdraw less money [from the industry] than the 15% export duty did in the five months [August-December],” said another industry source.

The 15% export duty of the Nov. 19 Black Sea slab price of $707.5/mt FOB totals $106/mt, or Rb7,780/mt.