Base Metals – Supply and Demand of Aluminum and Copper

Copper Aluminum

Base metals are less expensive than precious metals because of their abundance and they are generally easier to mine. But they are invaluable to the world economy because of their industrial and commercial applications. Here we will discuss the production, supply and demand, market fundamentals and different uses and applications of aluminum and copper.

 

Aluminum

China is the largest producer and consumer of aluminum by a large degree. China had a smelter production of 36 million metric tons in 2019.

This base metal is produced through electrolysis of aluminum ore or bauxite which is mainly produced in China, Brazil and Australia. Aluminum oxide is extracted from the ore using the Hall-Héroult electrolysis process. The primary aluminum product is used in alloys or cast in ingots. As a commodity, aluminum can be delivered directly into exchange-approved warehouses.

There is currently an oversupply of aluminum which has significantly reduced its prices in the global market. In 2019, production cost in China was about $1,690 per metric ton. Around 35% of aluminum producers incurred heavy losses because of the high cost of production and low demand.

Aluminum is used in automotive vehicles, electrical appliances, power transmission. The demand for this metal is also influenced by housing development, its use as a substitute for steel in cars and consumption of carbonated soda drinks.

 

Copper

Chile is the largest producer of copper by far. Around 30% of copper ore comes from Chile. Its Escondida mine is the largest copper mine in the world, produced 1.2 million metric tons of copper content in 2018. On an annual basis, Chile as a whole produces about 5.8 million tons of copper.

Copper is mined either underground or from open pits. Copper ore is converted into copper concentrates through beneficiation. Then copper is extracted from the ore through smelting and then melted and cast as anodes.

From 1994 to 2014, there was a significant increase in copper supply in response to the high demand during China’s industrialization. Mining companies have doubled their production during this period and reduced production cost which led to higher profitability. But they incurred significant losses in 2014 when oil prices experienced a steep drop.

Copper has widespread applications in commercial and industrial markets and in most sectors of the economy. It is used in homes and factories, from plumbing to electronics and power generation and transmission. Copper is also considered a reliable indicator of economic condition. The demand for this base metal is also positively affected by the promotion of electric vehicles, intensive power infrastructure, subsidy schemes for home appliances and government-backed copper.