Sandfire Resources checking China copper ban reports
Sandfire is ‘not aware’ of reasons for a reported potential China ban on Australian copper, but says it can find other buyers.
Sandfire Resources says it is confident it can find other buyers for its copper if a mooted ban on Australian concentrate and ore eventuates, although the company says it “is not aware of the reasons for the reported potential ban”.
The West Australian copper miner told the market on Tuesday it is in contact with its Chinese customers and says it cannot confirm the reliability of reports suggesting China is about to add Australian copper to a growing list of Australian exports hit by tensions between Beijing and Canberra.
Australian agricultural products including barley have been hit with tariff imposts, with wine also targeted and reports from China suggesting Australian wheat, wool, lobster, coal, sugar and copper ore are about to join the list.
Sandfire sold more than 90 per cent of the output from it’s DeGrussa mine to China last financial year, with its three major Chinese customers accounting for more than 83 per cent of its total $633.2m in revenue from contracts with customers.
But the company said it was confident that even if a China ban eventuated, it could find alternative homes for its product.
“Should it be required, Sandfire is confident in its ability to increase sales contract volumes to existing and also new copper concentrate customers in non-Chinese markets (for example, into existing markets in Japan, Korea, the Philippines and Europe) based on its market soundings and engagement during its regular tender processes,” the company said.
“The global copper concentrate markets are mature, robust and highly competitive for clean, high quality concentrate such as that produced from DeGrussa over the past 8 years.”
China was easily Australia’s biggest copper customer last financial year, according to data compiled by the Department of Industry, buying $3.7bn worth of copper from Australian mines.
Japanese smelters took $2bn worth of Australian copper in the same period, with Malaysia the nation’s third largest customer, buying $800m worth of copper products.
Sandfire shares closed on Monday at $4.44.
China was easily Australia’s biggest copper customer last financial year, according to data compiled by the Department of Industry, buying $3.7bn worth of copper from Australian mines.
Japanese smelters took $2bn worth of Australian copper in the same period, with Malaysia the nation’s third largest customer, buying $800m worth of copper products.
The airing of potential bans of Australian copper comes only weeks after reports China’s strategic reserves bureau had been stockpiling copper, seen at the time as a measure to protect China’s industrial heartland from potential supply disruptions in the face of coronavirus issues in South America, the world’s biggest supplier of copper, and from ongoing tensions with the US.
But such a stockpile could also provide a reserve that would allow the disruption of imports from Australian mines without impacting Chinese buyers.
In a research note circulated to Citi clients on Tuesday, analyst Max Layton flagged a looming weakness in copper pricing - which briefly spiked two weeks ago on news of China’s stockpiling - if the state stockpiler stops buying.
“Physical softness inside and outside of China has not been significant enough to see prices weaken in recent weeks, perhaps in part reflecting China State stockpiling activity, and if anything we see the risks from the physical side of things to the downside - in particular the potential for a large decline in Chinese refined imports in the coming months,” he said.