Explanation of relevant risks

The risks associated with our business are explained in the following sections according to our risk clusters. Furthermore, the main measures and instruments we use to counter these risks are also outlined. We have separately indicated risks and risk-relevant issues that we currently classify as potentially medium to high.

Supply and production

The ability to keep the production facilities supplied with raw materials and the availability of these facilities are of the utmost importance for the Aurubis Group. Potential large-scale disruptions are viewed as high risks.

To ensure the supply of copper concentrates for Business Unit Primary Copper, we have concluded long-term agreements with a number of concentrate suppliers from various countries. In this way, we are able to reduce the risk of production interruptions caused by possible delivery failures significantly. The risk of volatile treatment and refining charges on the spot market is also limited by the long-term nature of the agreements.

The recycling facilities were well supplied overall due to our extensive international supplier network despite weak availability of copper scrap in some cases. From today’s standpoint, we expect this sufficient supply situation and utilization of our production facilities for recycling material to continue. Nevertheless, there are ongoing treatment charge volatilities due to the general metal price trend, metal traders’ collecting activity and inventory management, the European economic situation and competition for the secondary raw materials relevant for Aurubis.

The material supply in the copper product fabrication facilities is mainly covered by copper cathodes produced within the Group. In addition to higher value added, this allows for quality control for copper products during the entire process. We were able to cover most of the demand for copper cathodes for BU Copper Products internally, therefore ensuring our delivery reliability and the quality of our products. We also procured a sufficient volume of copper-bearing raw materials for the production plants of Business Line Flat Rolled Products. We expect the supply to remain sufficient in this area as well.

Plant availability was satisfactory overall, though it was reduced at times due to scheduled maintenance standstills and technical disruptions. Preparations for the large-scale shutdown at the Pirdop site in fiscal year 2015/16 are currently underway.

As a matter of principle, we took organizational measures (for example alarm plans and employee drills) to handle potential incidents such as flooding or fire. We also address the risk of malfunctions by carrying out regular maintenance work and keeping critical replacement parts on hand.

We deal with logistics risks by implementing a thorough, multi-step acceptance process for service providers, by avoiding single sourcing and by preventively developing back-up solutions. We have an international network of qualified service providers at our disposal and, for instance, minimize weather-related risks in the transport chain by avoiding contingency risks through contractual arrangements regarding appropriate alternatives.


In addition to supply and production risks, the Aurubis Group also faces sales risks, which are classified as “medium”.

The sales situation for copper products developed favorably overall in a positive market environment during the past fiscal year. Sales in the rod sector increased again compared to the previous year. We expect the current market situation to continue and product sales to be stable this fiscal year. Overall, there is high price pressure on the market due to overcapacities.

After a seasonally weaker start to the fiscal year, demand for sulfuric acid recovered, particularly in the fertilizer industry. At the end of the second half of the year, however, the price situation in spot business weakened owing to an oversupply on the market with stable demand. We expect the price weakness to continue until the spring.

Aurubis sells cathodes that are not processed internally on the international copper cathode market.


The energy prices tended to decrease in the course of the fiscal year. We are safeguarded against unplanned cost ­fluctuations from unpredictable and volatile prices on the electricity exchange owing to our electricity contract which has been in effect since 2010. This safeguard corresponds to most of our electricity demand and covers the main German sites. We also deal with fundamental supply security as well as the potential and limitations of more flexible energy sourcing which arise due to the increasing, volatile feed-in of renewable energies.

Burdens resulting from changes in potential cost drivers such as the German Renewable Energies Act (EEG), the emissions trade, grid charges and the eco-tax are generally difficult to quantify reliably because of the still uncertain legal situation and changing political conditions. We expect the tax burden to remain at the current level in the medium term due to the 2014 German EEG passed this year. According to present knowledge, there will be no significant additional charges from the state aid investigation regarding the network charge exemption in the past periods.

The fundamental retention of the special carbon leakage status for certain sectors starting in 2021 with regards to the allocation of emission trading allowances and CO2 electricity price compensation is currently being discussed by policymakers. From today’s perspective, it is difficult to predict the result. We expect costs to increase in the medium term overall, which could lead to significant strains. The topic of energy and the associated risks, currently classified as “medium”, will remain relevant for Aurubis as an energy-­intensive company in the future as well.

Finance and financing

Metal price and exchange rate fluctuations represent a potential risk in the buying and selling of metals. This risk is substantially reduced with foreign exchange and metal price hedging. Metal backlogs are hedged daily with financial instruments such as spot and forward contracts. The same occurs by using spot and forward exchange contracts to hedge foreign currencies. Foreign exchange risks from exchange rate fluctuations are also minimized on a daily basis this way. We have only selected first-rate, credit-­worthy firms as partners for hedging transactions to minimize the credit risk.

We hedge expected receipts from foreign currencies, especially the US dollar, with options and forward exchange transactions in some cases. We will continue this in the future as well and expect that we can reduce the risks from metal price and exchange rate fluctuations to a reasonable level with these measures.

Credit risks from trade accounts receivable are largely hedged by commercial credit insurances. Internal risks were only permitted to a very limited extent and after review. The development of the outstanding receivables is monitored closely. During the reporting period there were no significant bad debts. We do not foresee any threatening trends for future development. 

The liquidity supply is very important for the Aurubis Group and was secured during the past fiscal year. The credit lines at the banks were also sufficient. From the current perspective, we expect a corresponding trend for the new fiscal year as well. Risks that could result from the resurgence of the sovereign debt crisis in the Eurozone and which we currently classify as “medium” are monitored by the treasury function.

Environmental protection and other aspects

There is always a risk that environmental or regulatory provisions could become more stringent, leading to added costs or limitations in product fabrication and marketing. For example, there is a risk that increasingly strict environmental legislation will restrict the marketing of iron silicate more and more. We have started a capital expenditure project in the Hamburg primary smelter to counter this development. From an environmental perspective, the target is to reduce the impurities in the iron silicate with an additional preparation stage. We also want to achieve greater flexibility on the sales market by expanding our granulation capacities.

In addition, environmental risks resulting from the possible failure to comply with limit values and violations of requirements can have legal consequences. We ensure the environmentally sound operation of our production facilities to counter this. We are an international leader in environmental protection, which is confirmed by annual certifications in accordance with ISO 14001 and EMAS, for example. We consider ourselves to be well positioned for the future in this regard. Nevertheless, operational incidents that could have an adverse impact on the environment cannot be completely ruled out. Overall, we classify the environmental risks as “medium”.

In a plant with complex processes, employees’ specialist knowledge is an important factor to ensure performance quality. Different measures are intertwined with each other so that Aurubis can continue to count on employees’ know-how. We build connections to qualified young people through our cooperation and contact with universities and foster development among professionals and managers with qualification measures.

Occupational safety and health protection take high priority for us. We focus on individual responsibility, detailed hazard assessments, training and short-term and medium-term goals with the objective of “zero accidents”.

We counter legal, tax and compliance risks with organizational procedures and clear management structures. We are closely following the political discussion about tax issues, for example the financial transaction and capital tax, and their possible effects. Anti-trust proceedings against Aurubis are currently underway in Bulgaria. The Aurubis Group considers the allegations unfounded.

We limit the risks of decreased IT system availability with continuous monitoring, technical precautions and necessary adjustments. The redundant design of our IT infrastructure as well as data recovery and continuity plans counter the risks of possible incidents or disasters. In order to prevent the risks of unauthorized access to Company data, we restrict the issue of access rights, carry out security reviews and use modern security technologies.

Furthermore, selected risks are largely covered by insurances. We rely on the expertise of an external insurance broker for this purpose.