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The copper global value chain and the black hole of China

By Ruggero Golini and Mattia Cornolti, Università degli Studi di Bergamo, Department of Engineering
 

Raw materials global value chains are becoming increasingly relevant for the world economy. In this article, we focus on the global value chain of copper and copper-based alloys that are used in a broad variety of applications in everyday life. Copper, in fact, is an indispensable asset today and presumably will continue to be so in the future. However, its global value chain shows some peculiar characteristics with a dominant role of very few countries.

The copper global value chain can be divided into four main stages:

  1. mining production
  2. fabrication and manufacture
  3. product use
  4. end-of-life management

Let’s focus on the first two stages (mining production and fabrication).

The mining production phase includes the following sub-phases: extraction, smelter and refinery.

Extraction of copper-bearing ores is the initial production activity. There are three basic ways to mine copper: surface, underground mining and leaching. Open-pit mining is the predominant mining method in the world. In the beginning of the 20th century world production was less than 500 thousand tons of copper, but then it has grown about by 3% per year to reach over 16 million tons in 2011. The leading country is South America that grew from less than 750 thousand tons of copper in 1960 to 7 million tons in 2011 (of which 5.3 come from Chile).

Next, smelting is the process used to produce pure copper. The output of this phase is called anode or blister. In 2011, world copper smelter production reached 15.8 million tons copper (that is, about 100% of the extracted copper). Recently,  the new process of leaching has been introduced and increasingly used (SX-EW). Primary smelters use mine concentrates as their main input. Secondary copper smelters use copper scrap that derives from either metals discarded in fabrication or finished product manufacturing processes (“new scrap”) or obsolete end-of-life products (“old scrap”). In this sub-phase Asia is the dominant player with a share of world copper smelter production jumped from 27% in 1990 to 55% in 2011. Taking into account 2011 primary and secondary smelting, China accounted for around 30% of world copper smelter production, followed by Japan (9%), Chile (9%) and the Russian Federation (5%). Finally, the copper is refined.

After that, in the fabrication phase we analyze the production of semis. The semis is the copper with a defined shape such as cathodes, wire bar, ingot, billet slab and cake into semi-finished copper and copper alloy products. Semis fabricators are considered to be the “first users” of refined copper and include ingot makers, master alloy plants, wire rod plants, brass mills, alloy wire mills, foundries and foil mills. Also in this phase, Asia is the dominant player and in fact it accounted for 66% of semis production in 2010 with more than 15.2 million metric tons, up from 22% in 1980.

From this brief analysis the most relevant result is the leading role of China. While Chile is the main exporter of copper, China has the lead in the following phases (table 1). This explains why there is a huge export flow from Chile to China or raw copper, but then the international trade flows of refined copper are very limited especially those out flowing from China. As a matter of fact, the production remains concentrated in China until the copper is used in final products creating a kind of black hole.

Table 1 Ranking dominant countries involved in copper production.

References:

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