China copper smelters eye more output cuts as raw material supply tightens
Panama Cobre mine closure, output cuts squeezing supply
CRU sees global shortage of 1.1 mln tons of copper-in-concentrate in 2025
Large smelters less affected, smaller ones seen struggling
By Siyi Liu and Mai Nguyen
July 18 (Reuters) -A shortage of copper concentrate this year has forced a few smelters in China to cut output, and more curtailments could follow next year when raw material supply is expected to tighten further, industry participants and analysts said.
Refined copper output in top producer China is closely watched by investors betting on tight long-term supply driven by rising demand for energy transition technology. The December closure of First Quantum's FM.TO Panama Cobre mine and output cuts elsewhere have squeezed raw material supply for smelters.
CRU, a research and consultancy firm, predicts a shortage of concentrate feed globally in 2025 at 1.1 million metric tons of copper-in-concentrate. This will likely lead to 300,000 tons of capacity closures, a 640,000-ton reduction in demand from smelters lowering their utilisation rates and around 150,000 tons of smelter project delays.
While large smelters reliant on yearly contract purchases are less affected by the concentrate shortage given they signed treatment and refining charges (TC/RCs) agreements at $80 per ton and 8 cents per pound for this year's supply, smaller producers are under pressure to cut production as spot TCs fall along with concentrate supply.
In the first half of this year, several small and medium smelters in China trimmed production, while among larger players Jinchuan cut output at two plants for one month each by 10% and 20% and Baiyin cut output at a smelter by 20-30% in March, CRU said in a June report.
Baiyin and Jinchuan did not immediately respond to requests for comment.
"As the supply shortages get worse, there will be more smelters taking action to cut output," an official at a mid-sized smelter said, declining to be identified.
Falling spot TCs and expectations of sharply lower benchmark prices next year prompted some smelters to plan output cuts for 2025, according to analysts and market participants.
Most smelters only make their production plans for the next year in September and October, one producer said.
"With 2025's TC/RC annual benchmark expected to be at a level which is uneconomic for most smelters, they are likely to be less incentivised to operate at high utilisation rates," said CRU analyst Craig Lang.
Baotou Huading Copper Industry Development Co said at a meeting of top smelters last week that it could cut output by 40% next year, two people familiar with the matter said. The company, which declined to comment, has annual capacity of 30,000 tons refined copper and 200,000 tons of blister.
Daye Nonferrous Metals Group Holdings Co, with annual capacity of 930,000 tons, plans to trim smelting output by 20% next year, Bloomberg reported on Wednesday.
A Daye investor relations official denied that it mentioned an output cut at the meeting, without commenting on current production conditions or its 2025 plan.
However, big output cuts are unlikely, as large smelters in China are mainly state-owned and have a responsibility to maintain production and sustain economic growth, analysts and industry players said.
"Companies all have revenue targets to reach and it's not simple and easy to lower production for all of next year. Everyone will come back online if TCs go back to 50," an official at a large state smelter said, declining to be named.
Despite the concentrate tightness, China's refined copper output rose 7% in the first half of this year to 6.67 million tons, official data showed.
China monthly refined copper output https://tmsnrt.rs/3Y4KuHO
China's copper TCs fall to historic lows https://tmsnrt.rs/4d9THmB
Reporting by Siyi Liu in Beijing and Mai Nguyen in Hanoi; Additional reporting by Julian Luk in London and Beijing Newsroom; Editing by Tony Munroe and Emelia Sithole-Matarise
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