Copper Ores

SIC 1021

Companies in this industry

Industry report:

This category includes establishments primarily engaged in mining, milling, or otherwise preparing copper ores. This industry also includes establishments primarily engaged in the recovery of copper concentrates by precipitation and leaching of copper ore.

Industry Snapshot

A global commodity business, copper mining and milling is subject to swings in both prices and production levels, depending on world markets and individual companies' operating strategies. World demand for copper has grown steadily since the late 1970s, but in the late 1990s ambitious copper producers--including many in Chile, the world's largest copper-producing country--ramped up new mining capacity faster than the market could absorb their production. In addition, economic weakness in Asia and Latin America in the late 1990s left global demand growth at a slower pace than some producers anticipated.

As a result, copper supplies ran heavy, and copper prices slumped by as much as 50 percent in the latter half of the 1990s, reaching Great Depression-era levels when adjusted for inflation. Soft prices decimated copper companies' profits and triggered a frantic round of consolidation among major producers. Continuing into the 2000s, soft prices, weak demand, and rising inventories remained problematic for the industry. However, the International Copper Study Group (ICSG) reported that a 5.1 percent increase in worldwide production was expected for 2008.

The United States was the world's second largest copper producer behind Chile and a net importer of copper, obtaining 1.0 million metric tons of refined copper from abroad in 2005 worth $3.54 billion. In 2005 U.S. mines turned out 1.14 million metric tons of recoverable copper valued at $4.36 billion, representing approximately 7.5 percent of world production (15.1 million metric tons). The U.S. Geological Survey estimated that U.S. consumption of refined copper materials in 2005 was at 2.27 million metric tons, down from the 2001 total of 2.62 million metric tons along with 951,000 metric tons of copper recovered from old and new copper-base scrap.

In 2005 the U.S. Census Bureau reported 23 establishments engaged in mining, beneficiating, or otherwise preparing copper ores and manganiferous ores valued chiefly for their copper content. At that time, the industry employed about 7,570 people for a total annual payroll of nearly $433 million.

Building construction represented 51 percent of copper and copper alloy products in 2006. Transportation equipment accounted for 10 percent while industrial machinery and equipment comprised nearly 9 percent. Electric and electronic products totaled 19 percent, and consumer and general product mix constituted the remaining 11 percent.

Organization and Structure

Stages of Production.
Copper extraction and processing involves several stages, which vary with the kind of ore and technology being used. Integrated producers are involved in all stages, including ones that are considered outside the scope of this industry classification. Also, because copper ores are recovered along with a variety of other useful minerals, most copper-mining companies also have side businesses to handle other metals, such as gold, silver, and molybdenum.

Copper ore, which may be mined underground or, more commonly, at the surface in an open pit, is unearthed with digging equipment or explosive devices. The material is then transported by conveyor or by truck to a mill or plant, often on site, that crushes and grinds the ore into a powder.

In the next step, called concentrating, the powder is mixed with water and chemicals, which cause copper sulfide ores to float to the top, where they may be separated from some of the other minerals. Once the copper is skimmed, the copper mix, or concentrate, may be piped as slurry to another site for additional processing, or it may be dried and transported via truck or ship.

Meanwhile, the leftover liquid, known as tailings, can be processed further for copper oxide ores and other useful minerals. This material can be broken down further by treating with acid, known as leaching, and applying one of several methods to separate the copper from other substances.

Concentrate must be purified and refined before it yields copper that is ready for manufacturing applications. While for classification purposes this advanced processing is the domain of SIC 3331: Primary Smelting and Refining of Copper, in practice many of the major copper-mining firms are involved to some degree in these activities. Many mines have smelters or refineries on site.
Copper Sales and Markets.
Large copper producers typically sell their products in two ways: by contract and on-the-spot markets. Contracts are usually for one to three years and may involve selling copper ores or concentrates at various points in the production process, depending on the client's needs and capabilities. While many manufacturers require copper in a state that is ready to go directly into their products, and thus purchase it as refined cathode, rod, or wire, others buy concentrate and do their own smelting, refining, shaping, and so forth.

Copper also is sold on the open market. Major world markets, such as the London Metal Exchange, provide a large and efficient medium for financial transactions relating to the copper trade. Transactions may take the form of spot contracts, in which the parties arrange for the physical transfer of copper or futures/options contracts, which are market instruments that enable financial hedging against adverse price movements, but no physical exchange occurs. A variety of copper trading firms and brokerages also act as intermediaries for bringing together buyers and sellers.

Copper Use by Sector.
According to the U.S. Geological Survey, building construction uses the largest share of copper in the United States, representing 49 percent of consumption in 2006. Single-family homes in the United States use an average of 422 pounds of copper in their construction. Copper products are used in a variety of building construction materials, and they hold a 92 percent market share of electrical wiring in building (8 percent aluminum). Plumbing and heating components are the second largest building industry use of copper, but this sector faces increasing competition from improved plastic materials.

Electric and electronic products accounted for 20 percent of copper consumption. Copper's electrical conductivity properties enable it to be widely used for telephone and power lines. Other notable sectors that consume copper include transportation equipment and consumer and general products, each accounting for 11 percent of the market share, while industrial machinery and equipment came in at 9 percent. Cars, trucks, and vans use copper in their electrical systems and have been increasing their use of copper. The popularity of larger models, like sport-utility vehicles, and the growth of electronic features in cars have contributed to copper's success in the transportation sector.

The greatest opportunities for increasing copper sales include new home wiring, as well as retrofitting existing homes with up-to-date wiring for digital and cable capacities. Copper, which tends to be more expensive than other materials, boasts excellent energy efficiency, reliability, and strength.

Copper Production.
The United States has two major copper-producing regions: the Butte district of Montana and a region composed of Arizona, New Mexico, Utah, and Nevada. In 2005 just 14 U.S. mines supplied more than 99 percent of national copper output. Arizona is the largest copper-producing state, generating 60 percent of the total U.S. copper content as of 2005.

Copper is a relatively homogeneous product. Copper mined and processed in Arizona is in essence the same as copper mined and processed in Chile. Therefore, success in the copper industry depends on keeping production costs low compared to market prices. Major production costs for U.S. producers include labor costs, environmental regulations, and energy costs. New technical processes also have been central to keeping costs down.

Background and Development

Copper has been mined since ancient times. The Egyptians, for example, mined copper 5,000 years ago. In the United States, significant copper mining began in 1845, when the Pittsburgh and Boston Company started a mine in Michigan's Upper Peninsula. According to Hildebrand and Mangum, there were 25 mining companies located in the Upper Peninsula by 1850. The Calumet and Hecla Mining Company, founded in 1870, quickly became a dominant copper producer. Michigan's Upper Peninsula was the only significant copper-producing region during this period. In the late 1870s, Butte, Montana, experienced a mining bonanza. The copper mines in Butte were the largest underground copper source ever found. The vast Western copper deposits eventually eclipsed the original Michigan mining operations.

Technological innovations changed the nature of copper mining. The early mines were underground operations. Innovations like nitroglycerin, power drills, electric power, and steam shovels increased the productivity of copper mining. Massive open-pit operations eventually replaced underground mines. Milling and smelting technology also improved.

The industry eventually recognized that economies of scale were the key to efficient and profitable copper mining. Hildebrand and Mangum point out that this major innovation resulted from a combination of smaller technological breakthroughs like gravity separation, the Chilean mill (for grinding separated ore), and the steam shovel. In addition, copper mining companies eventually recognized that large initial fixed costs became insignificant when a copper mine produced a huge output. Following World War II, massive open-pit mining and the consolidation of large integrated companies became the norm in the industry. By the 1990s the U.S. copper industry, dominated by a handful of industry leaders, was the world's second largest copper producer.

With copper prices at historic lows in the late 1990s, a wave of consolidation swept through the U.S. industry, highlighted by several prominent shutdowns and mergers. Australia-based Broken Hill Proprietary, operating as BHP Copper Co. in the United States, had closed all of its U.S. copper operations by 1999, after acquiring them in its ill-timed purchase of Magma Copper Co. just four years earlier. BHP's mines had produced around 10 percent of U.S. copper output, but the company was not one of the low-cost producers and was hit especially hard when copper prices plummeted. Other companies closed individual mines in an effort to cut their losses and ease the glut of copper on the market.

Mergers have been another legacy of rock-bottom copper prices. In 1999 Asarco Inc. and Cyprus Amax Minerals Company began merger talks to form what would have been the world's second largest copper company. The parties estimated that a merger would save some $200 million a year in operating costs between the two. Then, in a surprise move, the largest U.S. copper firm, Phelps Dodge, made bids for both Asarco and Cyprus, proposing a three-way merger that would have created the world's largest copper concern. The targeted firms, however, balked at Phelps Dodge's offer on grounds that it was too little and shortchanged their shareholders. While executives at Asarco and Cyprus were determined to fend off Phelps' overtures, some shareholders of the respective companies opposed the Asarco-Cyprus deal. Meanwhile, Phelps continued to make its case aggressively, threatening a lawsuit and a proxy battle and, eventually, increasing its offering price.

As relations between Asarco and Cyprus began to cool, a fourth company, Grupo Mexico S.A. de C.V., entered the fray. Grupo Mexico, a diversified mining company, offered to merge with Asarco at more attractive terms than either of the earlier offers. Phelps chose not to match the new offer. In the end, two mergers were inked: Phelps with Cyprus, and Asarco with Grupo Mexico.

The production cuts during this period of consolidation were expected to help shed the oversupply of copper, although certain producers outside the United States have proven more reluctant to curtail their output. Still, as demand revived in depressed areas like Asia, copper consumption was forecast to catch up with supply. After a devastating first six months of 1999, when copper averaged $0.65 a pound, prices rebounded modestly in the latter part of the year, to the mid-70 cent range, after several of the closures had been announced.

Domestic mine production continued a downward trend in 2000 with 1.44 million metric tons, and in 2001 with 1.34 million metric tons, representing a 30 percent decrease since 1997. Despite the decline in copper production in the United States, world mining of copper increased. Although this represents a slowdown from the rapid expansion of copper mining activities during the 1990s, world copper consumption dropped 13 percent, thus contributing to the problem of surplus supply that has kept the price of copper depressed. U.S. production of copper is expected to continue to decrease.

Mergers and consolidation of the industry that began in the 1990s resulted in the emergence of three companies that produced more than 95 percent of U.S. copper: Phelps Dodge Inc., Asarco Inc. (owned by Grupo Mexico S.A. de C.V.), and Kennecott Utah Copper Corp. (owned by Reno Tinto PLC of the United Kingdom). Falling prices, rising inventory, and decreased demand have prompted copper producers in the United States to cut back operations. Following the terrorist attacks of September 11, 2001, the already struggling industry responded by closing facilities and reducing production amounts. For example, Phelps Dodge closed two of its plants in 2002 and halved production in two others. Mine closings and restructuring continue to negatively affect the amount of copper production in the United States, as the full impact of the changes has yet to be realized.

Current Conditions

The International Copper Study Group (ICSG) reported in 2006 that U.S. mines produced 1.22 million metric tons. Domestic mine production of recoverable copper fell slightly to 1.14 million metric tons in 2005 from 1.16 million metric tons in 2004, according to the U.S. Geological Survey. The largest consumer of copper and copper alloy products was the construction industry, representing 49 percent of consumption, up from 39 percent in 2001. That was followed by electric and electronic products at 20 percent, while transportation equipment and consumer and general products each accounted for 11 percent. Industrial machinery and equipment held 9 percent of the market. The states representing 99 percent of total copper output were Arizona, Utah, New Mexico, Nevada, and Montana. Global copper production increased by some 400,000 metric tons, or nearly percent in 2005.

Worldwide copper demand is expected to keep up pace with China's accelerated industrialization direction in the mid-2000s and beyond. Copper mine production worldwide rose an average of 3 percent a year from 1997 to 2006, when it hit 15 million tons, according to the International Copper Study Group. During this period, production in Chile and Africa increased, while U.S. production fell 38 percent. In 2005 China was the leading consumer of refined copper with a 22 percent share, which represented an 8 percent apparent consumption.

Early indications had been positive for copper mining in 2005. However, a slow start in the construction industry and other copper end-use markets kept the copper industry suppressed, and prices on the rise. According to one trade source, cited in American Metal Market, "Demand for products that contain copper also is lower because the high price of energy is forcing consumers to pay more for their gas and electricity." Adding to the industry's problems was a worker strike at Asarco in July 2005 involving 1,500 employees due to an expired contract; the strike was settled in November 2005 but the facilities were not fully functional until February 2006.

Industry Leaders

Freeport-McMoRan Copper and Gold Inc. (FCX)
After acquiring Phelps Dodge Corporation in 2007 for about $26 billion in cash and stocks, New Orleans-based Freeport-McMoRan Copper and Gold Inc. was by far the largest copper producer worldwide. Phelps Dodge Corporation was founded in 1834 as a partnership between Anson Greene Phelps, William Dodge, and Daniel James. The company purchased two copper mines in the 1880s. By 1906 its copper mining and smelting operations had become so successful that it moved exclusively into the copper industry. Their Morenci mine located at Greenlee, Arizona, is the largest in the United States. According to Thomson Gale's Business & Company Resource Center, (BCRC) FCX's worldwide operations had nearly $5.8 billion in 2006 sales with about 15,648 employees.

Asarco L.L.C. and Southern Copper Corp. of Grupo Mexico.
Purchased by Grupo Mexico in November 1999, Tucson, Arizona-based Asarco was founded in 1899 by Henry Rogers and Adolph Lewisohn. Originally named the American Smelting and Refining Company, Asarco concerned itself primarily with copper, lead, and silver smelting and refining. By the 1990s Asarco had become a fully integrated copper mining and processing organization, producing an estimated 294,000 metric tons of copper in the United States during 1998. In the mid-2000s, the company produced about 600 million pounds of copper. However, a labor strike in 2005 led to their filing for bankruptcy protection. Grupo Mexico actually had historical ties to Asarco, originating as Asarco's Mexican operations and later taking the name Asarco Mexicana. The company gradually gained majority control of Mexican business concerns and grew through a series of mergers and acquisitions. Some observers speculated that Asarco's stake in a Peruvian mining company was a major reason for Grupo Mexico's bid for Asarco.

Phoenix, Arizona-based Southern Copper Corp. (SCC) had sales of nearly $5.5 billion in 2006 with about 12,218 employees, per Thomson Gale's BCRC. Though the SCC was based in the United States their mines were located in Peru and Mexico.

Rio Tinto PLC.
Though not a U.S. based company, London-based Rio Tinto PLC is noteworthy within the U.S. copper industry both as the parent company to several U.S. copper concerns and as a major world copper producer. Its biggest U.S. holding is Kennecott Utah Copper, which operates Bingham Canyon near Salt Lake City, one of the largest copper mines in the United States. The site also includes a major smelting and refining operation that can accommodate all of the mine's output. Among its other global interests, Rio Tinto has a 30 percent stake in Chile's Escondido mine, the world's largest copper mine. Rio Tinto likewise has a minority stake in Freeport-McMoRan Copper and Gold Inc. (FCX).


The U.S. copper industry employed about 7,570 people in 2005 per the U.S. Census Bureau, which reflected a general downward trend over the previous decade. The metal ore mining industry experienced significant job reductions from 1994 to 2004 of 19,000 workers (from 46,000 to 27,000), according to the U.S. Department of Labor's Bureau of Labor Statistics (BLS). This drop was expected to continue through 2014 with an additional job loss of 8,000 workers. Per the BLS's May 2006 report, the leading category was construction and extraction occupations with 38 percent of the total, which included median hourly wages of $21.19 for a mean annual of $45,130. Following was installation, maintenance, and repair occupations with a median hourly wage of $22.61 and a mean annual of $47,330.

America and the World

According to the International Copper Study Group (ICSG), world production of copper from mines stood at 15.0 million metric tons in content in 2006. South America is by far the leader in copper mine capacity (with 6.9 million metric tons in 2006) with Asia as the next closest (less than 3.0 million metric ton). This represented a significant change from 1980 when North America was the leading region (with 2.8 million metric tons) followed by South America (with 1.8 million metric tons). Chile is the world's largest producer of copper, mining nearly 36 percent of the world supply or 5.36 million metric tons of copper output in 2006 along with having eight of the top 20 copper-producing mines worldwide in 2006. Having relinquished the role as the world's leading copper producer to Chile in the 1990s, the United States was the second largest producer in 2006 with 1.22 million metric tons. Other major producers in 2006 included Peru (1.05 million metric tons), Australia (859,000 metric tons), China (844,000 metric tons), Indonesia (816,000 metric tons), Russian Federation (675,000 metric tons), Canada (607,000 metric tons), and Zambia (509,000 metric tons). In Chile and in other nations, government ownership of mines is commonplace.

Per the ICSG, Japan led in imports of copper ores and concentrates in 2006 with 1.3 million metric tons followed by China with 1.08 million metric tons; the countries combine for a total of 46 percent of the 5.23 million metric tons worldwide imports. Chile is the largest exporting country worldwide with nearly 42 percent of all exports (2.17 million metric tons).

Research and Technology

A notable advance in copper mining technology is the solvent extraction-electrowinning (SX-EW) method of production. The SX-EW process involves saturating copper-bearing ores with sulfuric acid solutions. The sulfuric acid dissolves the copper and then recovers it by the electrowinning process, in which the dissolved copper is deposited onto charged cathodes. The process is significantly less expensive than traditional methods because it involves fewer steps. It also reduces air pollution control costs because it avoids the smelting process. Currently, only oxide and secondary sulfide ores can be processed with the SX-EW process. These ores are located close to the surface, where they have been exposed to oxygen. It is estimated that only 15 percent of world copper reserves and 13 percent of U.S. copper reserves can be processed via the SX-EW method. However, coupled with other new lower-cost processing methods, use of the SX-EW process can significantly reduce production costs, and thus large U.S. producers have been quick to adopt it.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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