China’s top metals group calls for ceiling on copper capacity

China should consider imposing a ceiling on domestic copper, zinc and lead production capacity to tackle cutthroat domestic competition, according to the country’s main metals association.

China Nonferrous Metals Industry Association is urging the country to consider the move to curb new capacity, copying a practice the government did with its giant aluminum industry, the group said in a Thursday statement following its quarterly briefing.

Copper is heading for its best monthly gains on the London Metal Exchange since September, buoyed by supply disruptions at major mines across South America, Africa, and Asia. The resulting shortage of raw material has eroded smelters’ margins, with spot treatment charges remaining in negative territory.

The association said last month it submitted proposals to the central government recommending strict controls on new copper projects as domestic smelters warned about competition driving processing fees to historical lows and threatening the industry’s health.

The government in China, the world’s largest producer of industrial metals, has been leading a broad push against excessive competition in key industries such as steelmaking 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 a trade war with the US while reversing a property-market slump.

“Involution-style” competition — a term commonly used to describe the country’s intense, self-harming industrial race — has also reduced Chinese companies’ pricing power in raw material purchases, trimming profitability and hurting sustainable development, the association said.

LME copper prices were little changed at $10,920.50 a ton at 11:34 a.m. in Singapore. Aluminum and tin climbed higher.

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