Low copper price, improving Europe economy lift Aurubis sales volumes

SANTIAGO, April 8 Tue Apr 8, 2014 12:06pm EDT

SANTIAGO, April 8 (Reuters) - A falling copper price and an improving economy in Europe will lift European smelter and producer Aurubis's sales volumes growth of copper wire this year, from flat growth last year, a company executive said on Monday.

Copper has steadied somewhat since falling to 3-1/2 year lows in March after a bond default by a Chinese company aroused fears about credit problems in the country. Still, investors remain wary of slowing growth rates in China.

"The European economy has developed well and we have a big exposure to Europe, so our product sales went up," Stefan Boel, a member of Aurubis's executive board said.

"The copper price dropped, so we became more competitive, and many customers started fixing forwards," he told Reuters in an interview on the sidelines of the CRU/CESCO copper conference in Santiago.

He estimates overall growth in wire rod sales volumes in Europe this year at 3-5 percent. "But our volumes? Double digits," he said, declining to give an exact figure. "I cannot go more into detail. Last year we had no growth."

The euro zone emerged from recession in the last three months of 2013, and the economy is likely to have grown further in the first three months of 2014.

At the same time, European metal products manufacturers are experiencing the most favorable conditions for buying copper in over two years as metal prices remain weak and the euro strong, and many are buying forwards to lock in cheap supply.

In the first three months of its financial year which started on Oct. 1, Aurubis's wire rod output rose 23 percent to 156,000 tonnes.

But it posted a pre-tax loss of 73 million euros for the first quarter of its 2013/14 fiscal year which started on Oct. 1 against a 13 million euro profit a year earlier due to delays to modernization work at its Hamburg plant and a weak scrap market.

"We are in a business where we need volumes," Boel said. "We are typically in a high volume, low margin business in general. So if you don't have the volumes you are in deep trouble."

HEAVY SEAS

The company's chief executive, Peter Willbrandt, said in February Aurubis was still "in heavy seas" but he saw positive signs for this year, with high output restored at the company's main Hamburg plant after a long maintenance.

Aurubis's copper products unit processes cathodes into copper products, including cast wire rod, and markets them. End users include the electrical engineering, automotive, mechanical engineering, telecommunications and construction industries.

Boel sees a balanced copper market this year.

A Reuters survey in January showed the copper market surplus 260,500 tonnes this year, smaller than 328,000 tonnes predicted for 2014 in a similar poll last quarter.

A surplus is good news for smelters, which charge miners to treat and refine concentrate (TC/RCs) into metal.

Aurubis said in February, global spot copper ore treatment and refining charges (TC/RCs) were $100 a tonne and 10 cents a lb. This was down from $110 a tonne and 11 cents a lb, Aurubis reported in January.

Boel sees TC/RCs this year remaining in triple figures, but declined to be more specific.

"After so many years of being hammered by low TC/RC it's not too bad," he said. (Reporting by Susan Thomas; Editing by Sofina Mirza-Reid)

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