China’s CMOC and other miners have applied for copper from the Democratic Republic of Congo (DRC) to be registered for delivery against London Metal Exchange (LME) contracts, four sources with knowledge of the matter said.
If they succeed, large amounts of copper from DRC, the world’s second biggest copper producer, could arrive in LME-approved warehouses as soon as next year, the sources said, taking account of the time required to process the applications.
For producers, LME brand status opens up financing opportunities in an oversupplied market. For an exchange that has been unable to accept new Russian metal since April because of sanctions, it provides income from registration and warranting fees.
CMOC’s Tenke Fungurume (TFM), one of the rapidly expanding copper producers in the DRC with annual capacity of 450,000 metric tons, is having its copper tested at rod mills to ensure it meets LME requirements, the sources said.
One said a lot of paperwork needed to be done to meet LME standards, while another said other “brands of DRC-origin” were also being tested but refused to name them because their applications had not yet been filed.
An LME spokesperson said the LME welcomed applications from the world over to help ensure the price of LME copper futures reflects the diversity of supplies.
“A brand list representing global production is a crucial component in ensuring globally relevant pricing for LME contracts,” an LME spokesperson told Reuters, adding two new African copper brands had been listed since January last year without naming them.
DRC last year produced 2.7 million tonnes of copper, or 12% of global supplies, data from the International Copper Study Group (ICSG) showed.
But on a list of more than 100 LME-registered copper brands, only one is from DRC – SCM, produced by a joint venture between China Railway, Sinohydro Group and DRC mining authority.
It has yet to deposit any of its DRC copper, according to public records on LME stocks for the end of June, when LME stocks available to the market stood at 163,025 metric tons.
Russian copper deposited before April, when sanctions took effect, accounts for a quarter of the amount, compared to a peak of 95% in 2021.
Weak market
Copper prices hit a record in May, driven by speculative fund-buying. A quick reversal followed as funds took profit and consumers scaled back orders.
Longer term, demand is growing as the highly conductive metal is essential in electrification to shift the world to a less carbon intensive economy, even if for now the copper market is oversupplied.
That is largely because the world’s biggest commodity consumer China is grappling with a weak economy, and local producers sold a record amount of copper overseas in June.
Much of that has been delivered into the LME’s registered warehouses in Asia over the last two months. LME-listed copper is easier to finance than non-registered brands.
The LME is the market of last resort and copper listed for storage in its warehouses can be delivered against copper futures traded on the exchange when their contracts expire. In its 2023 annual report, CMOC said it was aiming for LME delivery for copper produced at TFM and its Kisanfu (KFM) mines.
Ethical concerns
Planned output increases could boost CMOC’s copper production to between 800,000 tons and 1 million tons by 2028 from an expected 570,000 tons this year.
As DRC’s prominence grows, some environmental, social and governance (ESG) investors have raised concerns about its place in the supply chain.
The biggest issue is informal mining or artisanal mining that involves people digging by hand using simple tools, a practice that has been associated with child labour and illicit trade. The unregulated mining often takes place next to major mines where reserves are known to be established.
To address ESG concerns, including informal mining, The Copper Mark, was set up as an independent body with backing from major consumer companies, as a voluntary scheme to endorse copper that has been produced sustainably.
A CMOC spokesperson said then the label would be “conducive to the recognition of products on exchanges like LME, potentially leading to premiums”.
A Copper Mark report in June showed TFM had met 16 out of the 32 criterion assessed by the scheme’s audit team.
The Copper Mark status of TFM does not mean an absence of artisanal mining, the organisation said.
On the contrary, the report found an estimated 10,000 artisanal miners in the area of the TFM mine, but said assessors found they were “typically cheerful on site”.
The organisation told Reuters it granted the Copper Mark to TFM on the condition it would work to improve the artisanal miners’ working conditions.
