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Red Metal Report

The Scrap Can Stay Home

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MCN Editor Dan Markham For the first time in decades, copper scrap is being smelted in the United States. Is this the start of a revolution?

To John Gross, the development taking place in three locations in the Southern United States is “the most important change we’ve seen in the U.S. [copper industry] in years.”

Gross, the publisher of The Copper Journal, is speaking about the development of secondary copper smelters, a part of the red metals supply chain that has been non-existent in the U.S. for two decades. He delivered a presentation on the topic at the October CBSCA Red Metals Summit. 

“These three companies will grow, I believe, and I think other companies will come onboard in creating secondary smelting operations,” he says.

Earlier this year, Ames Copper Group opened the first of the three planned facilities, this one in Shelby, N.C. The operation is expected to produce 50,000 tons annually of copper anodes. The company, a joint venture between nonferrous processor Prime Materials Recovery and Spain’s Cunext, says it will become the first secondary copper recycling facility in the U.S. to produce anodes from copper scrap and fines. 

Additionally, Wieland North America has chosen Shelbyville, Ky., for its $100 million investment in smelting. The facility will be used to convert copper scrap to ingot. The facility, part of Wieland’s ongoing push into growing its overall recycling operations, will produce 100,000 tons per year. Initial plans called for the operation to be open by year’s end. 

Finally, there’s a facility being opened by Germany’s Aurubis. This operation, which is located in Augusta, Ga., is a multi-metal secondary smelter. The $300 million plant is expected to be fully operational by mid-2024. 

Once it has ramped up completely, the facility will have the capacity to process approximately 90,000 tons of material annually. Copper scrap will be converted to copper blister. 

“The U.S. currently produces about 6 million tons of recycling materials that contain valuable metals. We want to take advantage of this great potential and help ensure that these materials get reused. They are critical input materials for many industries in the U.S.,” said  Roland Harings, CEO for Aurubis AG.

Prior to these investments, the U.S. had been without any secondary smelting operations for red metals since shortly after the turn of the century, when the last of five major smelters shut down. The retired operations were victims of outdated technology, financial limitations and, primarily, environmental constraints. 

The effect on the U.S. scrap industry was profound. Before 2001, most U.S. scrap was kept at home, feeding those smelters. Since then, exports of copper scrap have skyrocketed, totaling more than one million short tons in 2021.  

Most of those tons have been routed to China, which had virtually no domestic copper industry prior to 2002. In 2021, China accounted for more than 220,000 tons of U.S. copper exports, 56 percent higher than the next most frequent destination, Malaysia. 

What happens with this new copper, such as the anodes produced by Ames Copper Group, is unknown. “It’s too early to draw a conclusion on what’s going to happen in the future,” Gross says. “The question is where will the anode be refined. I would hesitate to say it’s going to add to refined copper being produced in the U.S. It could go to a refinery in Canada or a refinery in Europe.”

To him, the development is more symbolic of the undeniable need to handle more of the copper production process here in the United States, a fact the pandemic and related supply chain shortages revealed in stark detail. 
He points to the ongoing invasion of Ukraine as an example of the dangers of overseas operations, and not just for the unpredictability that comes with such long-distance supply chains.

Hundreds of U.S. companies have abandoned operations in Russia as a result of the unprovoked attack, leaving behind billions in investments in the process. It’s not hard to imagine the same kind of mass exodus in China if it pursues a similarly aggressive course in Taiwan. 

“If people two years ago had any idea what was going to happen with Russia and Ukraine, they would have looked for the exits. It seems the writing is kind of on the wall with China, and companies would be well served to either begin taking action or have a Plan B in place,” he says. 

If such a scenario unfolds, U.S. companies would be well-served to not just look for the next cheapest alternative, but return much of their manufacturing operations home. Simply near-shoring to South America is inviting more of the same, given the political changes taking place in some red metals hotbeds. Today’s friends may become tomorrow’s adversaries. 

The perfect example of that, he says, was Saudi Arabia’s recent decision to roll back its crude oil production despite pleas from the Biden administration not to. “That should be the wakeup call for the people in government to reassess this whole thing. Our dependence on foreign oil is not good. As is our dependence on other countries for copper,” he says. 

Rather, the prudent measure is for the United States to return to be fully involved in the copper production process, from mining to the end use product. And the ongoing push for sustainability and decarbonization only reinforces that idea. 

“I believe there’s going to be a wakeup call in the United States. We’re on a green energy transition, but we do not have the copper to support it. And we can’t pretend that we do. California says after 2035 no more internal combustion engines. Meanwhile, people can’t keep their air conditioners going,” he says. 

“There’s a misconception of what’s possible.”

Meeting the needs of the future will become much more feasible if copper is placed on the critical minerals list, which it was not when the U.S. government made its initial classification of such raw materials. If it does happen, that should expedite the process of approving exploration efforts, many of which have been in limbo for up to a decade. He cited four proposed mining projects (Alaska’s Pebble Mine, Minnesota’s Twin Metals and Arizona’s Resolution Mine and Rosemont) that remain at a standstill. The Alaska and Arizona projects could yield more than 47 million metric tons of copper ore, while the Minnesota project has an unknown cap at this time.

The problem these projects have is not a blanket refusal from the government to proceed, but far too many governing agencies that have to be navigated before dirt can be moved. A major project can face bureaucratic roadblocks from the departments of Natural Resources, Fish and Wildlife, air control, water bodies and more. “To my way of thinking, there has to be a more coordinated approach between government, industry and academia as well. There are technologies these PhDs can put their minds to and get over these environmental issues. We can’t have different parts of the government stymying the whole operation.”

Should the U.S. once again become more capable of supplying the whole front-to-back copper production process, it will have a lot of positives for the domestic supply chain, though it won’t necessarily signal return to a more stable and predictable pricing, Gross acknowledges. 

“In the ’70s and ’80s, there was a fairly clean, inverse relationship between price and inventories – inventories rise and prices fall, inventories fall and prices rise. But we have so many things influencing the market today, whether it’s high-frequency traders or hedge funds. We’re in a situation now where global inventories of copper are at rock bottom levels, yet we have the price lower today than it was months ago. There’s a major disconnect going on,” Gross says.

U.S. exports of copper scrap have exploded in the last 20 years while imports of refined scrap have tumbled. Source:  The Copper Journal