Primary Smelting and Refining of Copper

SIC 3331

Companies in this industry

Industry report:

This industry consists of companies that smelt copper from ore and refine copper by electrolytic or other processes. Those establishments engaged in rolling, drawing, or extruding copper are classified in SIC 3351: Rolling, Drawing, and Extruding of Copper.

Industry Snapshot

Copper has excellent properties that make it useful to many industries. As a base metal, copper is used both alone and in alloyed combinations with other metals. The electrical, communications, and construction industries use copper in many of their products. According to the U.S. Geological Survey, approximately three-quarters of U.S. copper consumption is for electrical uses, including power transmission and generation, building wiring, and telecommunication. In terms of quantity used as a major industrial metal, copper ranked third behind iron and aluminum in the late 2000s. Copper faced increasing competition, however, from other materials such as plastics and other highly engineered materials in electronics and electrical applications. In the late 2000s, the U.S. copper industry was marked by record high prices as the industry rode the wave of the rapidly expanding housing industry, until prices fell dramatically following the collapse of the housing market as well as the U.S. auto industry in 2008 and 2009.

The value of industry shipments fluctuated significantly. After falling from $5.39 billion to $2.20 billion between 1997 and 2001, shipments in the primary smelting and refining of copper industry rose to $3.50 billion by 2005 before jumping to $7.05 billion in 2006. Product shipments from the primary refining and smelting of copper declined somewhat in 2007 and 2008, falling to $6.48 billion and $6.40 billion, respectively. Employment in the industry dropped from 7,360 workers in 1997 to 1,700 in 2008.

Organization and Structure

Companies engaged in smelting and refining copper create products for a variety of national and international industries. End-use markets for copper and copper alloy can be categorized into five functional uses. In 1994, 55 percent of copper products was used for electrical purposes, and 25 percent was used because the products were corrosion resistant. Another 11 percent of copper products were used in heat transfer functions, while eight percent went toward structural purposes. The final functional use is the aesthetic use of copper products. The end-use markets for copper were primarily building-related or industrial machinery and equipment-related.

Copper in the United States went from the mines to the smelters. In some cases, the same company owned both, and in some cases, the mining and smelting were performed at nearby facilities. The mining and smelting companies are the producers of copper materials, while the wire rod mills, brass mills, and foundries work with copper and prepare the metal for delivery to manufacturers in various industries.

Mining companies process copper ores, most of which are retrieved from open-pit mines. These ores are refined and sometimes alloyed with other elements, such as zinc or beryllium. A primary smelting reactor such as a reverberatory furnace produces copper sulfide from concentrated ore. Some reverberatory furnaces were replaced by oxygen/flash smelting, which created less air pollution. The final step in smelting and refining work involves an electrolytic or other refining process. The resulting copper is often close to 100 percent pure.

Background and Development

Copper mining had origins in the Middle East, but reached its zenith in America. In the mid-eighteenth century, miners in the colonies discovered copper ores in what is now the northeastern United States. They mined these ores, but English law prohibited the establishment of smelting works in the colonies, so the ore was sent to England for smelting and refining.

After the American Revolution, miners and smelters moved to the newly created United States and began working in American mines and refineries. Copper sheathing began to be used on wooden ships as early as the 1790s. The copper protected the ships from the pressure and corrosive effects of the ocean. Great demand from the shipping industry helped the budding copper industry, but the United States still depended on copper imports from England and South America. In 1806, U.S. importers of copper asked Congress to exempt copper from customs duty. The protests lodged by copper industry pioneers succeeded in lowering tariffs applied to copper imports.

In the early 1800s, U.S. companies began to use blast furnaces for smelting and refining copper. Later, with the rise of American industry, growing copper works created stripping, boiler plates, rivets, and other copper-based items that were used in an increasingly diverse number of industries and products. Copper nails replaced cast iron nails in building, a windfall for the copper industry since towns and cities were being built as fast as possible all across the new nation.

The reserves of copper in the United States did not suffer appreciably during the twentieth century. Although copper has been in use for more than 10,000 years, about three-quarters of all copper consumed has been produced since World War II.

U.S. smelter production of copper reached its peak in the early 1970s at 1.8 million metric tons (mmt) annually. At that time, the trend in the copper smelting industry was for oil companies to purchase smelters, refining companies, and mines. In the following decade, almost all these oil companies sold off their copper companies, leaving them independent again, but this time with a renewed sense of the marketplace. Workers in some of these companies learned new technologies that enabled them to compete in the international copper arena. Instead of the pyrometallurgy of the reverberatory furnaces, many smelters introduced hydrometallurgical processing that produced copper with purity and quality that matched that of electrolytically refined copper.

The 1980s were not boom years for many players in the various copper-related industries. The three largest U.S. producers of copper--Asarco, Phelps Dodge Corporation, and AMAX, Inc.--lost almost $2.5 billion from 1982 through 1985. These companies, however, remained leaders in the field despite their difficulties. Many other companies in the copper industry went out of business, though. Those that remained made drastic changes to cut operating costs and improve efficiency. These cost-cutting measures at times exacerbated difficulties with labor.

The copper smelting business grew in value through the 1980s and 1990s. In 1987, shipments were valued at $2.55 billion, and the size of the total work force was 3,300. Five years later, shipments had grown to $5.58 billion with total employment at 5,600. By 1994, shipments had grown to $6.18 billion, and total employment was at 6,400. The number of establishments dedicated to copper smelting reached a low during the 1980s; approximately 12 establishments existed in 1986. By the mid-1990s, there were approximately 20 establishments.

Nearing the end of the twentieth century, all the players in the copper industry were involved in the recyclability of copper. Recycled copper is highly valued, as "high-grade" scrap often retains more than 90 percent of the value of newly mined copper.

Total worldwide smelter production of copper in 1993 was 9.5 million short tons, a decrease from the high of 9.7 million in 1989, according to the U.S. Geological Survey. International competition was a factor in the 1990s, as was an increased environmental consciousness in the United States. One copper company declined to build a new smelting facility in Texas after environmental groups protested.

In the late 1990s, the copper industry suffered from a falling-off of the golden era it experienced in the late 1980s. Between 1986 and 1988, consumption exceeded demand by one million tons. As would be expected, the price of copper reached a record high in 1988, averaging $1.15 per pound. In contrast, production outstripped demand in the late 1990s. Copper prices plummeted to 66.8 cents per pound. Copper averaged 75 cents per pound in the late 1990s. The industry's 16 establishments shipped $6.12 billion worth of goods in 1997. By 2000, total industry shipments had fallen to $2.44 billion.

Copper industry executives recognize successful applications of copper in many existing industries and are working to expand the use of copper in other industries. One of the key roles of the Copper Development Association (CDA), a leading representative body for the industry, is to work with manufacturers to develop new uses for copper. The CDA creates programs aimed at increasing copper usage in specific industries. In Europe, for instance, copper was used four times more than in the U.S. for architectural applications.

In 2006, 12 establishments were involved in the primary smelting and refining of copper industry in the United States. Although mine production of copper in the United States increased only slightly from 1.14 mmt in 2005 to 1.20 mmt in 2006, the value of shipments for the primary smelting and refining of copper rose from $3.5 billion to $5.5 billion over the same period. Mine production in 2007 was roughly 1.19 mmt.

While smelter production was down four percent in 2006 and U.S. consumption of refined copper declined seven percent from 2005, copper prices continued an upward trend that began in the early 2000s because of increased demand in Europe and strong demand in China. A worldwide deficit of refined copper from 2003 through 2005 eased somewhat in 2006, and prices reached a record of more than $4 per pound in May 2006--nearly twice the previously recorded record high of $2.25 set in December 2005. The average price for copper in 2006 was $3.08 per pound. Prices fell below $3 per pound in the first quarter of 2007 before increasing to average $3.53 through the second and third quarters of the year.

Current Conditions

In 2009, the United States had three primary smelters, four electrolytic refineries, three fire refineries, and 15 solvent extraction-electrowinning facilities in operation. The refined copper from this facilities was consumed at 30 brass mills; 15 rod mills; and approximately 500 foundries, chemical plants, and other facilities. Of U.S. copper consumption, 50 percent was designated for building construction, 21 percent for electric and electronic products, 11 percent for transportation equipment, 10 percent for consumer and general products, and eight percent for industrial machinery and equipment.

In the mid- to late 2000s, the copper industry was marked by record high prices. Fueled by high demand and low supply, copper price soared to a record high of $4.06 per pound in 2006. Prices remained above $3.60 a pound through the first three quarters of 2008 until the U.S. housing market and auto industry collapsed, and the United States entered a recession. Then prices plummeted to $1.70 per pound. At the same time, productions costs increased by as much as 48 percent due to lower grades of ores available to U.S. copper miners.

As a result, some producers scaled back expansion plans, and consequently, production fell in 2009 by about nine percent to 1.19 million tons, down from 1.31 million tons in 2008. During 2010, prices climbed into the $3.60 range by September, primarily due to short supply of copper. Smelters, on the other hand, were at overcapacity and were having trouble getting copper to work with.

Industry Leaders

Freeport-McMoRan Copper & Gold of Phoenix, Arizona, acquired Phelps Dodge Corp. for $26 billion in 2007 to create the second-largest copper company in the world, behind Corporaci�n Nacional del Cobre de Chile (known as Codelco) of Santiago, Chile. Copper accounted for the majority of Freeport-McMoRan's $15 billion in sales in 2009. Phelps Dodge Corp. had been the U.S. leader in primary smelting and refining of copper at the turn of the century and through the early and mid-2000s. Another U.S. leader had been Asarco LLC of Tucson, Arizona. It sold its majority interest in Southern Copper Corp. to a Mexican company in 2003, and Asarco filed for Chapter 11 bankruptcy protection in 2005. In 2010, Asarco operated as a subsidiary of the Mexican mining conglomerate, Grupo M�xico.

Workforce

According to Dun and Bradstreet, the industry had 40 establishments and employed 4,391 workers in 2009. Ohio and Texas had the most businesses with five and four, respectively, but Arizona, New Mexico, and Utah had the most employees with 1,380, 1,264, and 830, respectively.

America and the World

Global consumption of copper in the late 2000s and early 2010s was driven by China. Refined copper consumption declined by double digits in 2009 in the European Union, Japan, and the United States, but increased by more than 25 percent in China. During the first seven months of 2010, refined production increased 5.6 percent, with China still leading the way, according to the International Copper Study Group. Specifically, during the first seven months, China accounted for 16 percent of refined copper consumption; Japan, 10 percent; and the European Union, 5.6 percent. The United States and Chile accounted for about 25 percent of global production. Worldwide utilization rate of refined production capacity was 79.6 percent during the first seven months of 2010, compared to 76.7 percent during the same time period in 2009.

The copper industry became increasingly global in its outlook in the 1990s. Smelters and refiners of copper were looking toward developing countries as markets for copper-based products. Those countries that were improving their infrastructures with telecommunications cables, power cables, and other basic building tools needed more copper. The Asian markets of China, Taiwan, and South Korea were expected to provide large new markets.

In 1993, a politically charged topic in the industry was the General Agreement on Tariffs and Trade (GATT). Copper industry leaders met with U.S. trade officials to request a reduction of Japanese and European tariffs under GATT. Their aim was to eliminate global tariffs on copper to gain better access to foreign markets; they argued that the Japanese market was too heavily protected. The U.S. International Trade Commission (ITC) rejected high tariffs on imported metals.

The U.S. formed an International Copper Study Group in the 1990s in conjunction with 17 other countries involved in the copper industry. Their aim was to allow information exchanges between producing and consuming countries and to increase copper production and consumption. The members of the group included Germany, China, Chile, Peru, and France.

Research and Technology

A low-cost method of production used in the 1990s in U.S. copper companies was known as SX-EW, or solvent extraction-electrowinning. Solutions of sulfuric acid were applied to dumps of copper-bearing ores, then the dissolved copper was recovered by depositing copper onto electrically charged cathodes. This process was known as electrowinning. SX-EW had fewer steps and caused less pollution at a lower cost than earlier production methods. Only some of the world's ore could be processed by this method. Primary sulfide ore, which is located deeper in mines and is usually found combined with other elements, was not eligible for SX-EW. The process was effective for oxide ore and secondary sulfide ore, which are found closer to the mine's surface, where the ore has been oxidized. Unfortunately, the contents of U.S. mines often mainly contain primary sulfide ores rather than oxide ores or secondary sulfide ores. Another process for copper production is known as the Escondida ammonia leach process. This process employs air combined with a solution of ammonia-ammonium sulfate, which leaches cuprous salts from chalcocite solutions. Approximately half the copper is leached, and the remainder can be recovered by a flotation recycle. This process was developed by and named for the Escondida mine in Chile and has been used successfully to produce cathode copper. An innovative leaching process, piloted at Chatwoods Australia, is known as the Intec process. This method of leaching has the added advantage that gold can be recovered on activated carbon at the same time that copper is being separated as its halogen complex. The metal from the Intec process is used for copper briquettes and wire or strips.

The technical research and market development area of the copper industry has promoted new technologies that use copper materials in a wide array of applications. These new applications include the use of copper radiators in the automobile industry. The copper industry emphasizes copper's positive features, such as its corrosion resistance and strength, and notes that the new radiators are also lighter and more durable than current copper radiators, which they would replace.

Other proposed uses of copper include solar energy systems, nuclear waste disposal canisters, and superconductivity applications. Industrial applications, such as valves, fittings, and power utilities, remain steady users of copper. Until 1982, another copper user was the U.S. mint, which coined pennies using a copper alloy. In 1982, the copper alloy was replaced by zinc. Another loss to the industry was the increasing use of fiber optics products, which began to replace some copper telecommunications equipment.

Recyclability became increasingly important at the turn of the century. Because copper was more easily recycled than many other metals, more copper was recovered from recycled material than was obtained from newly mined ores. This combination of recycled copper materials and healthy U.S. deposits of copper made the country highly self-sufficient in copper. Aluminum, which competed with copper in many areas, was a more difficult metal for the United States to obtain.

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