MILAN, Sept 1 (Reuters Breakingviews) – Criminals are setting their sights on the green transition. That’s one lesson from the problems at German copper producer Aurubis (NAFG.DE), whose shares fell 15% on Friday after it revealed a shortfall of inventories, which it concluded was linked to illicit activity. With demand set to outstrip supply for key metals like copper, such fraud risks becoming more common. It’s a problem for the world’s shift to low-carbon energy.
Metals scams seem to be on the rise. In February, global commodity trader Trafigura booked a $577 million charge after it discovered some nickel cargoes it had paid for did not contain the commodity. On Thursday, copper producer Aurubis said it had discovered large discrepancies in inventory levels at its Hamburg recycling centre, which strips out used copper and precious metals from discarded computer circuit boards.
The 3 billion euro company’s initial assessment of the incident, which comes after a separate theft case in June, suggests missing metals may lead to a hit of at least 100 million euros. That’s about one-fifth of its previously projected annual pre-tax profit of 450 million euros to 550 million euros for the financial year ending in September.
Aurubis’s travails throw the spotlight on a pressure point of the green transition. Moving away from fossil fuels requires huge amounts of copper, which is used in large quantities to expand and upgrade power grids and build electric vehicles, wind turbines and solar farms. Supply, however, could struggle to keep up with the green economy’s needs.Global production of refined copper products may grow 4% year-on-year to around 26 million metric tons in 2023, data from the International Energy Agency suggests. And it will expand to roughly 30.1 million tons by 2031, according to McKinsey. But the consultancy reckons global demand will reach 36.6 million tons at the start of the next decade, leaving a gap of more than 6 million tons per year.
The rush to electrify the world, coupled with supply bottlenecks, is pushing up the price of copper and other materials that are key to a low-carbon economy. That’s arguably a good thing for the producers, miners and traders that deal with these commodities. But it also makes them more susceptible to fraud.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
Germany’s Aurubis, a major European producer of copper wires, sheets and bars, said on Aug. 31 that it would not reach its full-year pre-tax profit target after identifying “considerable discrepancies” in its inventories.
The 3 billion euro company, also a leading producer of recycled copper, said that it had probably been the victim of “criminal activity”, making it impossible to reach its pre-tax profit goal of between 450 million euros and 550 million euros for the fiscal year to the end of September.
Shares in Aurubis were down 15% to 65.22 euros as of 1132 GMT on Sept. 1.