Chinese copper smelters agree on joint production cuts
Chinese top copper smelters on Wednesday came to a rare agreement to jointly embark on production cuts at some loss-making plants as they seek to cope with a shortage of raw material, according to sources with knowledge of the plans.
There were no specific rates or volumes set for the cuts and each smelter will make their own assessment of reductions they want to implement, said the sources who were not authorized to speak on the matter and declined to be identified.
The agreement, made at a meeting in Beijing, comes as fees to process copper concentrate on the spot market have dropped to their lowest in more than a decade.
Chinese top producers Jiangxi Copper, Tongling Nonferrous Metals Group, Jinchuan Group and China Copper did not immediately respond to a request for comment.
Chinese smelters have been rapidly expanding their capacity over the past year to get ahead of an expected surge in copper demand from sectors related to the green energy transition such as electric vehicles or wind and solar energy.
But several mine disruptions globally, including the shutdown of the big Cobre mine in Panama owned by First Quantum, have meant copper concentrate is now in short supply.
Spot copper treatment charges (TCs) in China tumbled to $11.20 per metric ton on Friday, representing a 76% drop in just two months and the lowest level since 2013, when pricing rating agency Fastmarkets started publishing the weekly index.
“I think this is a turning point for the continued sharp decline in spot TC/RCs over the last few months,” said Brian Peng, a copper analyst at research and consultancy firm CRU.
Cutting production and extending maintenance shutdowns would help to ease tightness in concentrate supply over the coming months, he said.
“But it’s important to note that there are around 1.7 million tons per year new ex-China smelter projects that is expected to come online in the second half, which will put more pressure on global concentrate supply,” Peng added.
The sources also said that other measures, including using more copper blister in production to lower consumption of copper ore concentrate, were also discussed during the meeting.
Top smelters, acknowledging the shortages, proposed production cuts in a meeting in January but no action took place, according to people familiar with the matter.
China’s refined copper output in the first two months this year climbed 9.2% to 1.75 million metric tons, according to a survey by research house Antaike of 22 producers covering over 80% of China’s total capacity.
Imports of copper concentrate came in at 4.66 million tons for the first two months of the year, up 0.6% compared to the same period a year earlier, customs data showed.
The most-traded copper contract on the Shanghai Futures Exchange hit a 22-month high on Wednesday following the news.
