The Metals Shift in Kazakhstan: Navigating Supply Risks and Opportunities in a Volatile Market

The metals landscape in Kazakhstan is undergoing a seismic shift, with copper production faltering while steel and ferro-alloys surge. This divergence—0.7% YTD copper output decline (11.5% drop in April 2025) versus 9.1%/5.3% YoY growth in steel/ferro-alloys—signals a structural rebalancing in the global metals complex. Investors must act swiftly to capitalize on these dynamics, pivoting toward steel-linked equities and shorting copper/gold to hedge against supply risks and geopolitical volatility.

The Copper Conundrum: Decline Amid Geopolitical Crosscurrents

Kazakhstan’s copper sector is buckling under dual pressures: supply-side constraints and shifting global trade dynamics. The 11.5% April production plunge reflects operational challenges at key producers like Kazzinc (Glencore’s subsidiary), which faces environmental scrutiny and logistical bottlenecks. Meanwhile, China’s trade rapprochement with the U.S. has weakened demand for Kazakh copper concentrates, exacerbating oversupply risks.

The TC/RC (Treatment and Refining Charges) mid-$40—a key indicator of copper processing costs—reveals a precarious equilibrium. While lower TC/RC levels typically signal tight supply, Kazakhstan’s output decline is outpacing demand, creating a paradox: a surplus of unprocessed copper concentrate. This sets the stage for a price collapse if miners rush to offload stockpiles.

Steel’s Rise: A Strategic Allocation Play

The steel sector, by contrast, is roaring. Kazakhstan’s 9.5% annual steel production growth in 2024 (to 4.17 million tons) and 21.4% January 2025 surge reflect aggressive investments and policy tailwinds. The Qarmet Iron and Steel Works—a linchpin of growth—is on track to produce 3.7 million tons of steel in 2025, a 12% jump from 2024. Backed by Chinese joint ventures (e.g., a $161M pig iron plant with Xinxing Ductile Iron Pipes) and a $1B agreement with China Metallurgical Group, Qarmet embodies the shift toward value-added industrial metals.

Investors should prioritize equities tied to infrastructure plays, such as steelmakers with exposure to Kazakhstan’s export-driven model. Consider the following:
- KAZ Minerals: A diversified miner now leaning into ferro-alloys and steel-linked projects.
- Qarmet Steel: Direct beneficiary of China’s insatiable demand for construction and manufacturing inputs.

Precious Metals: Structural Weakness Demands Shorts

Kazakhstan’s 32.8% YTD gold decline and 52.9% drop in silver underscore a broader shift away from precious metals. Geopolitical stability and inflationary pressures are waning, reducing safe-haven demand. Meanwhile, central banks’ reduced buying and the dollar’s resilience further depress prices.

Shorting gold (e.g., via GLD ETF) or copper (e.g., COPX ETF) offers asymmetric upside. The U.S. China trade deal—easing tariffs on steel but tightening scrutiny on copper imports—will exacerbate copper’s oversupply, while gold’s structural underperformance is cemented by falling ETF holdings and central bank divestment.

The Call to Action: Capitalize on Volatility

The data is clear: steel and ferro-alloys are the growth engines, while copper and gold face existential supply-demand mismatches. Investors must:
1. Allocate to steel-linked equities (e.g., Qarmet, KAZ Minerals infrastructure plays).
2. Short copper/gold via ETFs to exploit structural imbalances.
3. Monitor TC/RC trends—a drop below $40 could trigger a copper price rout.

Final Warning: Act Before the Shift Accelerates

Kazakhstan’s metals pivot is no flash in the pan. Policy mandates to ban raw material exports and favor domestic processing ensure steel and ferro-alloys dominate the country’s industrial strategy. With China’s economy rebounding and global infrastructure spending surging, the window to lock in gains on steel plays—and protect against copper/gold losses—is narrowing.

The time to act is now. The metals market is splitting, and those who bet against copper’s complacency and embrace steel’s resilience will dominate the next cycle.

DISCLAIMER: This analysis is for informational purposes only. Always conduct independent research and consult a financial advisor before making investment decisions.