By Jan Schwartz (Reuters)
HAMBURG, Aug 1 – Aurubis, Europe’s biggest copper smelter, expects solid results this year despite the impact of the euro zone debt crisis with copper demand from China likely to continue growing, its chief executive said.
“We expect results at last year’s level,” Peter Willbrandt told Reuters, two weeks ahead of the company’s publication of quarterly financial results.
“But the uncertainties about the further development of the economic environment and the continuing financial crisis remain large,” he said.
In its last fiscal year ending Sept. 30, 2011, Aurubis posted operating earnings before interest and tax (EBIT) of 327 million euros ($402.7 million).
In the first half of this financial year, its operating EBIT rose 42 percent to 193 million euros. It is due to publish results for its fiscal third quarter on Aug. 14.
Willbrandt’s optimism contrasts with problems elsewhere in Europe’s metals industry as the euro debt crisis rages.
German steelmaker Salzgitter forecast its steel division will slip into a loss as customers hold back on orders because of economic turbulence in the euro zone.
Germany’s biggest steelmaker ThyssenKrupp said it will temporarily curb working hours at its five steel plants in Germany in response to slow demand.
“We are currently working at full production,” Willbrandt said. “This applies to both recycling and primary copper output. The markets remain good for primary copper production and for recycling.”
Prices for sulphuric acid, a key by-product of copper output, have stabilised, he added.
Aurubis produces about 1 million tonnes of copper cathodes (new metal) annually along with a wide range of rolled and cast copper products.
“We continue to be optimistic about worldwide copper demand,” he said. “We expect China to continue to grow. This will increase (copper demand), this will also support copper prices.”
PRODUCT DEMAND SLACK
However, the euro zone crisis is reducing demand for copper products, he said, adding weakness in copper products markets reported in the first quarter has not changed.
“The main reason is especially the south European countries, where spending cuts are pressuring demand … In north European countries the picture looks better. In total, (product) deliveries are 15 to 20 percent under last year’s level.”
Copper demand from Europe’s car industry is likely to soften because of sluggish vehicle sales. Metal demand from the construction sector “is running well” but demand from the electricity industry is well under last year’s levels, he said.
This is largely because expansion of electricity transmission networks is trailing behind plans.
In the United States, Willbrandt expects slight growth in demand with the U.S. automobile industry continuing to achieve a relatively good performance.
SCRAP SUPPLY AMPLE
Availability of scrap copper has stabilised following the fall in copper prices and is again rising, with satisfactory scrap processing fees.
The spot market for copper treatment and refining charges (TC/RCs) “is moving upwards again, after showing weakness for some time,” he said.
TC/RCs are paid by miners and traders to smelters to refine concentrate into metal and are a key part of the global copper industry’s income.
But Aurubis currently has no concentrate purchasing requirement as it is well supplied, he said.
“We expect that the supplies offered on the spot market will continue to rise and that TC/RCs will continue to increase.”
MORE TAKEOVERS POSSIBLE
The chief executive said he would be open to acquisitions. Aurubis’ most recent takeover was the rolled products division of UK-headquartered group Luvata in 2011.
“If an opportunity presented itself in the European product sector, it cannot be ruled out that we would make a move,” he said. “But at the moment this is not the case.”
Aurubis has the financial power for an acquisition but does not see itself as under pressure to make a takeover.
“We have always said that we want further growth,” he said. “This can be internal growth and we are working on many projects. It can also be external growth.”
($1 = 0.8120 euros) (Reporting by Jan Schwartz; Writing by Michael Hogan; Editing by Mark Potter)