China’s copper smelting industry is grappling with a crisis as plunging processing fees threaten to squeeze profits. To address this challenge, leading smelters are scheduled to meet next week to discuss potential solutions, including production adjustments.
Shanghai Meeting Aims to Address Fee Collapse
Industry insiders report that major smelters like Jiangxi Copper and Tongling Nonferrous Metals Group will convene in Shanghai next Thursday. The agenda for this critical meeting reportedly includes:
- Market Outlook: Discussions on the future trajectory of the copper concentrate market.
- Processing Fee Guidance: Setting guidelines for spot processing fees in the second quarter of 2024.
- Production Planning: Potential adjustments to copper production levels may also be on the table.
Crushing Margins Force Action
China, the world’s dominant producer and consumer of refined copper, faces a critical juncture. Smelters are under immense pressure due to a sharp decline in treatment and refining charges (TCs) – the fees they receive for converting copper concentrate into usable metal.
This decline is attributed to a confluence of factors:
- Global Mine Supply Issues: Recent setbacks at global copper mines have disrupted supply chains.
- Rapid Chinese Capacity Expansion: A relentless increase in Chinese smelting capacity has intensified competition in the sector.
The upcoming meeting, organized by the Copper Smelters Purchasing Team, represents a crucial attempt to navigate this crisis. These quarterly meetings typically serve as a platform for smelters to establish minimum prices for concentrate purchases from miners.
This specific meeting follows recent talks between industry leaders and the Chinese government. These discussions reportedly centered on potential production cuts and capacity controls, with news of these talks contributing to a rise in refined copper prices.
Production Adjustments on the Horizon?
China’s refined copper production, which accounts for roughly half of global output, has shown signs of easing from record highs witnessed towards the end of 2023. Data indicates that production reached 2.215 million tons in the first two months of 2024, translating to a daily output of nearly 37,000 tons. While this signifies an 11% growth year-on-year, it falls short of the 38,000-ton daily output recorded in November 2023.
Analysts project further production declines in the second quarter due to factors like peak maintenance periods and smelters scheduling annual repairs earlier than usual.
The global copper market continues to experience fluctuations. As of this writing, benchmark copper futures on the London Metal Exchange (LME) were trading 0.6% lower at $8,925 per ton. Earlier this week, prices touched a high of $9,164.50, the strongest level since April 2024. This surge was partially fueled by expectations of an interest rate cut by the US Federal Reserve.
Representatives from Jiangxi Copper and Tongling Nonferrous Metals declined to comment on the upcoming meeting. However, the gathering signifies the Chinese copper smelting industry’s collective effort to address the current crisis. By collaborating on potential solutions, such as production adjustments and establishing a more stable fee structure, smelters hope to weather the storm and restore profitability.
Source: Mining.com
