Copper Mail No.

134 April 1, 2016

The Aurubis Copper Mail informs you monthly about current trends on
the copper market.

In focus

March was characterized by a slight price recovery on the copper market, which was
accompanied by a more stable price trend for crude oil and other raw materials. Copper was
positively influenced by the weaker US dollar and a more optimistic view on the Chinese real
estate market. Doubts about this upward trend for oil and copper havent completely
disappeared, however, especially since the metals price increase doesnt seem to line up
with the strong inventory increases in Chinese warehouses. The focus on the countrys
economic development alone took a backseat to some extent, but this is likely only
temporary.

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Economic situation

The initial results of the Chinese National Peoples Congress were hotly anticipated in March.
The five-year plan that was passed in the end assumes average annual economic growth of
6.5 % or more until 2020. The goal is to double incomes and economic performance
compared to 2010 by the end of the decade. The plan is to promote the service sector and to
reduce industrial overcapacities. Investments in infrastructure will remain high, which will
ultimately lead to corresponding copper demand. The head of the US Federal Reserve wants
to stick to her policy of cautious interest rate increases and has tried to dispel doubts about
economic recovery in the US. On the other hand, she has also pointed to unfavorable
developments abroad, namely in China and the rest of Asia. According to calculations by the
Asian Development Bank, the slowdown of growth in China will cost the Asian economic
growth rate 0.3 percentage points. According to information from Standard & Poors, the
recovery in Europe is only supported by consumption, though on the basis of strong
fundamentals. The corresponding European economic growth forecast for the year is
currently at 1.5 %.

Copper essentials

In the course of the recovery of the last few weeks, commodities have become a desirable
asset class once again. Nevertheless, with respect to the fundamental support, there are
risks of production and storage surpluses which vary by commodity. Does this also apply to

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copper? The International Copper Study Group (ICSG) recently published the preliminary
copper balance for 2015. According to this report, there was a production deficit of 57,000 t,
which even reached 167,000 t when taking the inventory changes in Chinese bonded
warehouses into account.

For 2016 and 2017, a largely balanced ratio of production and demand for refined copper is
also expected. A weak production trend will likely compensate for the low growth in copper
demand for the most part. The Chilean copper commission Cochilco believes that it is difficult
to forecast future demand accurately. With regards to China, the ICSG and CRU anticipate
demand growth of only 0.4 to 0.6 % for 2016. In light of this expectation, the inventory trend
in China raises some questions. After all, until recently, 395,000 t of refined copper was
being stored at the SHFE and an estimated 500,000 t at the Shanghai bonded warehouse.

While some interpret this as merely a sign of economic weakness, others view the situation
differently and point out that the overall copper inventories in China were at a comparable
level at the same time last year (end of March 2015: SHFE 243,000 t, Shanghai bonded
warehouse 610,000 t). On the one hand, volumes were supposedly transferred from the LME
to the SHFE. On the other hand, a Financial Times article dated March 31 stated that
Chinese smelters could have fulfilled physical delivery obligations deriving from exchange
contracts. The inventory increase is also a result of the high imports of the first two months of
2016, which were caused in part by the good arbitrage opportunities. Metal Bulletin provided
another explanation, mentioning the renewed use of physical copper for financing purposes.
The typical factors such as China and the US dollar will once again be decisive for the overall
developments in the next few weeks. The ongoing inventory trend will likely continue to be a
special focus.

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 Price trend

The LME copper price recovered somewhat in the past few weeks. It rose during the first
several days of March from US$ 4,726/t (settlement) to US$ 5,000/t and hovered around this
mark during the course of the month. The high for March was reached in the second half of
the month at US$ 5,103/t. The recovery lost momentum at the end of the month and the
price stabilized at US$ 4,940/t. Backwardation, the situation in which spot prices exceed
forward prices, also increased in the second half of March, most recently reaching US$ 30/t.

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 Copper raw materials

Anticipation was high. The quarterly meeting of the China Smelters Purchase Team (CSPT)
was scheduled for March 26. During this meeting, spot business with copper concentrates is
generally discussed more concretely, the revision of the treatment and refining charges
(TC/RCs) for copper concentrates in Q2 2016. The group of smelters had established a base
level of US$ 100/10 cents for January to March 2016, though spot transactions also took
place under US$ 90/9 cents according to market reports, in some cases at levels around
US$ 85/8.5 cents. Metal Bulletin and Reuters published the initial details on March 31. Metal
Bulletin reports that the result of the meeting was a floor of US$ 85/8.5 cents for TC/RCs in
Q2. According to Reuters, a TC/RC level of US$ 90-95/9.5 cents for spot imports of standard
concentrates in the period from April to June 2016 could also be possible, reflecting good
availability of volumes on the market. A trader was quoted who expects the TC/RC to
increase based on international traders willingness to sell.

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On the European copper scrap market, traders interest in new contracts has decreased
again following a revival during the previous month. The recovery of the copper price didnt
change this much. In some cases, there is a lack of primary material from the upstream
stages, which have scaled back their activities in the end-of-life sector due to the unfavorable
business situation on the iron and steel scrap market. At the same time, demand for copper
scrap is good. According to reports, copper cathodes are already being more strongly sought
out as an alternative in North America due to a lack of scrap availability.

Production

According to recent reports, the Chinese copper producer Jiangxi Copper Co. is planning to
cut production by 6.7 % for 2016, a reduction of around 80,000 t of refined copper compared
to the 2015 output (1.259 million t). Prior to this report, Tongling Nonferrous Metals had
announced that they wanted to reduce this years copper output by 110,000 t. These
announcements indicate the first concrete measures after nine Chinese copper smelters
from the China Smelters Purchase Team (CSPT) stated their intention in early December
2015 to cut their 2016 output by a total of 350,000 t. These smelters are state-owned. Low
copper prices and a lack of profitability were the reasons provided for this cut.

Inventories

The visible copper inventories in the LME warehouses continued to decline in March. On
March 30, they amounted to only 145,450 t after a decrease of about 48,000 t. This indicated
a continuation of the inventory reduction that had already reached 44,000 t in February. In
contrast, the volumes at the SHFE moved further upward, rising by 119,000 t to a monthly
high of 395,000 t. This development only reversed in the last week of March, with a decrease
to 386,000 t. It remains to be seen whether this will continue (see the Copper essentials
section). With an increase of about 4,000 t for a total of 65,000 t, the changes at the Comex
in the US hardly have an impact. The copper inventory in the Shanghai bonded warehouse
was supposedly at 520,000 t to 550,000 t on March 25, according to Metal Bulletin. CRU
estimates it at 465,000 t as of March 18, while Reuters currently sees it at 500,000 t.

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 Product markets

In the German electrical industry, the production plans in February remained stable in net
terms, according to the German Electrical and Electronic Manufacturers' Association (ZVEI).
A total of 25 % of companies want to increase their production in the next three months,
while 68 % assume that production will stabilize at the current level. Overall, 18 % of German
electrical engineering companies expect business to increase in the next six months and 70
% expect it to stay the same. In the other sector that is especially interesting for copper, the
automotive industry, the European automotive association released the European car
registration figures for February. They increased by 14.3 % compared to February 2015.