China’s top copper smelters call for action against new capacity

China’s top copper smelters are urging the authorities to tighten control over new capacity, warning that cut-throat competition has driven processing fees to historical lows, threatening the industry’s health.

The China Nonferrous Metals Industry Association has submitted proposals to the central government recommending strict controls on new projects, the group’s newspaper reported. Executives from producers including Jinchuan Group Co. and Jiangxi Copper Co. flagged increasing pressure from what they described as “involution-style” competition, it said, following a meeting on Wednesday.

A rapid expansion in global copper-smelting capacity — especially in China, the largest user — has torpedoed the fees processors can charge, forcing them below zero. At the same time, there’s been a shortage of ore, a situation that looks set to worsen after a spate of hits to supplies, including a halt at Freeport-McMoRan Inc.’s giant mine in Indonesia following a deadly accident.

In China, meanwhile, the government has been leading a broad push against what’s seen as excessive competition in key industries such as steel-making and solar production after years of capacity growth. The expansions have dragged down profitability and contributed to deep-seated deflationary pressures across Asia’s largest economy, just as Beijing seeks to push back against the US-led trade war and seeks to reverse a property-market slump.

State agencies are accelerating research into measures to better regulate copper-smelting capacity, and results are expected soon, the newspaper cited an association executive as saying, without giving details of potential policies.

(By Alfred Cang)