China copper smelters match record as foreign rivals falter

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.

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.

That’s proving a bigger problem for smelters outside China. Japan’s JX Advanced Metals Corp. said in a statement on Tuesday it’s considering output cuts due to tight concentrate supplies. The company owns 48% of Pan Pacific Copper Co., the biggest producer in Japan with total annual refined copper capacity of 650,000 tons.

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.

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.

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.

Copper prices on the London Metal Exchange fell 0.1% to $9,646 a ton as of 11:49 a.m. in Shanghai.

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