According to S&P Global’s latest update to Mining Saudi Arabia, copper supply risks from Iran (1.5% of global mined output) are minimal, as a 50% surge in stocks to 1.25M tons offers a significant buffer. Aluminum is experiencing short-term smelter concerns due to the Qatalum shutdown and precautionary measures by Alba, while premiums approach $3,700/t LME highs as alumina supply chains tighten, according to Ruilin Wang, Senior Principal Analyst for Copper at S&P Global Energy
In the case of aluminum, disruption is inevitable, but the extent depends on the duration of the conflict, according to Karen Norton, S&P Global Energy’s Associate Director for Aluminum. In base case forecasts, full losses are not expected at Qatalum (Qatar, 636,000 tpy) and Aluminum Bahrain (Alba), which together have 2.2 million tpy capacity and 3% of global output. Qatalum announces a controlled shutdown at the end of March (restart: 6-12 months); Alba’s declaration appears precautionary, with production intact so far. Regional smelters rely on Australian alumina (>2/3 imports, 22-day shipping), with 3-4 weeks of on-site stock-output curtailment looming if conflict persists. Near-term LME 3M prices could test 2022 highs above $3,700/t amid deficit fears, with premiums rising in Europe/US as UAE/Bahrain exports help offset Canadian shortfalls.
There are three interlocking factors driving the demand for copper in Saudi Arabia. Construction leads the way: giga-projects, the Red Sea development, and Qiddiya require massive amounts of wiring, plumbing, HVAC, and roofing, and copper rods are crucial to their electrical infrastructure. The cathode consumption is expected to rise by 3.7% compounded annually by 2030. As a result, renewable power targets of 50% by 2030 and net-zero emissions by 2060 require copper-heavy solar panels, wind turbines, grid-scale batteries, and transmission upgrades to maintain the same 3.7% annual growth rate.
Want an in-depth analysis of the copper industry and its relevance to Saudi?
An in-depth look at the copper industry will be covered in our April/May magazine issue.
