China Copper Smelters Match Record as Foreign Rivals Falter

82b7tgbvi{52ddsm3n59uu]3_media_dl_1.png Statistics bureau

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(Bloomberg) — Chinese copper production stayed at record levels last month, despite a plunge in the fees charged by smelters, piling the pressure on operations elsewhere in the world that compete for feedstock.

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Output of refined copper matched the previous month’s all-time high of 1.254 million tons, although there was an extra day in May. That pushed volumes over the first five months 8% above last year’s level, even as spot treatment charges have turned deeply negative as too much capacity chases insufficient supplies of ore. 

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That’s proving a bigger problem for producers outside China, with Japan’s JX Advanced Metals Corp. considering output cuts due to tight concentrate supplies, Fastmarkets reported this week.

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Beijing has tolerated a massive expansion in capacity to feed its world-beating clean energy industries. Moreover, Chinese smelters, which account for over half of global production, are led by relatively large and efficient state-owned firms that are more resistant to financial stresses.

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Those pressures are building, though. Half-yearly treatment charges are currently being negotiated, and given the shortage of ore it’s global miners that are firmly in the driving seat. They began the talks by proposing negative fees, a first for term contracts that would severely affect profits at smelters. 

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Soaring prices for byproducts of the smelting process, including sulfuric acid and gold, are helping keep the industry afloat. Producers are also using workarounds like replacing the concentrate supplied by miners with scrap.

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Copper prices on the London Metal Exchange were little changed at $9,652.50 a ton as of 9:57 a.m. in Shanghai.

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This Week’s Diary

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(All times Beijing)

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Thursday, June 19:

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Friday, June 20:

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(Updates with LME copper price in seventh paragraph)

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